<PAGE>
EATON VANCE INCOME FUND OF BOSTON
Supplement to Prospectus dated February 1, 1995
1. At a meeting of shareholders of Eaton Vance Income Fund of Boston (the
"Fund") held December 14, 1995, the shareholders approved the investment by the
Fund of no more than 15% of its net assets in investments which are not readily
marketable, restricted securities and securities eligible for resale pursuant to
Rule 144A of the Securities Act of 1933. In addition, the shareholders also
approved certain other changes to the fundamental investment policies of the
Fund, which are set forth in a supplement to the Fund's Statement of Additional
Information of even date.
2. Effective January 1, 1996, under the section entitled "Management of the
Fund", the following paragraph replaces the existing paragraph identifying the
portfolio manager.
Hooker Talcott, Jr. and Michael Weilheimer are the co-portfolio managers of
the Fund and Vice Presidents of Eaton Vance Management.
December 15, 1995 IBPPS
<PAGE>
EATON VANCE INCOME FUND OF BOSTON
Supplement to Statement of Additional Information
dated February 1, 1995
On December 14, 1995, the shareholders of the Fund met and approved
changes to the fundamental investment policies of the Fund, such that the
following replaces the list of policies set forth on pages 2-3 of the Statement
of Additional Information:
As a matter of fundamental policy, the Fund may not:
(1) With respect to 75% of the total assets of the Fund, purchase any
security if such purchase, at the time thereof, would cause more than 5% of the
value of the total assets of the Fund (taken at market value) to be invested in
the securities of a single issuer, or cause more than 10% of the total
outstanding voting securities of such issuer to be held by the Fund, except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940. (The use of options and futures transactions and
short sales may be deemed senior securities);
(3) Purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933 (restricted securities);
(5) Purchase any security if such purchase, at the time thereof, would
cause more than 25% of the Fund's total assets to be invested in any single
industry, provided that the electric, gas and telephone utility industries shall
be treated as separate industries for purposes of this restriction and further
provided that there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities;
(6) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(7) Purchase or sell physical commodities or contracts for the purchase
or sale of physical commodities; or
(8) Make loans to any person except by (i) the acquisition of debt
securities and making portfolio investments, (ii) entering into repurchase
agreements or (iii) lending portfolio securities.
The Fund has adopted the following nonfundamental investment policies
which may be changed by the Trustees without the approval of the Fund's
shareholders. As a matter of nonfundamental policy, the Fund may not (a) invest
more than 15% of net assets in investments which are not readily marketable,
including restricted securities and repurchase agreements maturing in more than
seven days. Restricted securities for the purposes of this limitation do not
include securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 and commercial paper issued pursuant to Section 4(2) of
said Act that the Board of Trustees, or its delegate, determines to be liquid;
(b) invest more than 5% of its total assets (taken at current value) in the
securities of issuers which, including their predecessors, have been in
operation for less than three years; (c) purchase put or call options on
securities if after such purchase more than 5% of its net assets, as measured by
the aggregate of the premiums paid for such options, would be so invested; (d)
purchase warrants in excess of 5% of assets, of which 2% may be warrants which
are not listed on the New York or American Stock Exchanges; (e) make short sales
of securities or maintain a short position, unless at all times when a short
position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issuer as, and equal in amount to, the
securities sold short, and unless not more than 25% of its net assets (taken at
current value) is held as collateral for such sales at any one time. (The Fund
will make such sales only for the purpose of deferring realization of gain or
loss for federal income tax purposes); (f) purchase or retain in its portfolio
any securities issued by an issuer, any of whose officers, directors, trustees
or security holders is an officer or Trustee of the Fund or is a member,
officer, director or trustee of an investment adviser of the Fund, if after the
purchase the securities of such issuer by the Fund one or more of such persons
owns beneficially more than 1/2 of 1% of the shares or securities or both (all
taken at market value) of such issuer and such persons owning more than 1/2 of
1% of such shares or securities together own beneficially more than 5% of such
shares or securities or both (all taken at market value); or (g) purchase oil,
gas or other mineral leases or purchase partnership interests in oil, gas or
other mineral exploration or development programs.
The shareholders also approved an Amended and Restated Declaration of
Trust for the Fund.
December 15, 1995 IBSAIS
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1995
EATON VANCE INCOME FUND OF BOSTON
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
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TABLE OF CONTENTS Page
General Information and History ........................................... 2
Investment Policies and Restrictions ...................................... 2
Other Investment Features ................................................. 3
Officers and Trustees of the Fund ......................................... 9
Control Persons and Principal Holders of Securities ....................... 10
Investment Adviser ........................................................ 10
Custodian ................................................................. 12
Independent Accountants ................................................... 13
Services for Accumulation ................................................. 13
Service for Withdrawal .................................................... 14
Portfolio Security Transactions ........................................... 14
Determination of Net Asset Value .......................................... 15
Investment Performance .................................................... 15
Taxes ..................................................................... 17
Principal Underwriter ..................................................... 19
Service Plan .............................................................. 20
Other Information ......................................................... 21
Financial Statements ...................................................... 22
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THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE CURRENT PROSPECTUS OF EATON VANCE INCOME FUND OF BOSTON (THE
"FUND") DATED FEBRUARY 1, 1995, AS SUPPLEMENTED FROM TIME TO TIME. THIS
STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH
PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING THE
PRINCIPAL UNDERWRITER (SEE BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
GENERAL INFORMATION AND HISTORY
Eaton Vance Income Fund of Boston (the "Fund") is a Massachusetts business
trust established under a Declaration of Trust dated March 27, 1989. Its
predecessor, Eaton Vance Income Fund of Boston, Inc., was organized as a
Maryland corporation and commenced operation in 1971. The Fund collectively with
its predecessor, as the context may require, are referred to as the Fund. The
Fund's investment adviser is Eaton Vance Management ("Eaton Vance" or the
"Investment Adviser"), a Massachusetts business trust. Eaton Vance is a
wholly-owned subsidiary of Eaton Vance Corp. ("EVC").
INVESTMENT POLICIES AND RESTRICTIONS
A substantial portion of the Fund's portfolio will generally consist of
fixed-income securities and dividend paying stocks. However, the Fund may also,
from time to time, invest in non-income producing bonds and obligations and in
non-dividend paying stocks and rights and warrants when it believes there is a
substantial opportunity for capital appreciation. Any realized gains from such
capital appreciation provide an opportunity for increasing the Fund's investment
in income producing securities. Bonds and preferred stocks will tend to be
acquired for current income and reasonable stability of capital; convertible
securities and common stocks will normally be acquired for their growth
potential as well as their yield. The percentages of assets invested in
fixed-income securities and the type of such securities held by the Fund will
vary and may include a broad range of quality in rated and unrated debt
securities, as described in the prospectus. The Fund does not invest in
companies for the primary purpose of acquiring control or management thereof.
The Fund does not seek to realize short-term gains. However, it may dispose
of fixed-income securities on a short term (less than six months) basis in order
to take advantage of differentials in bond prices and yields or of fluctuations
in interest rates consistent with its investment objective. Other securities may
also be disposed of earlier than originally anticipated because of changes in
business trends or developments, or other circumstances believed to render them
vulnerable to price decline or otherwise undesirable for continued holding.
See the information contained under the caption "How the Fund Invests its
Assets and Risks Associated with Investments" in the current prospectus for a
further description of the Fund's objective and investment policies.
The Fund operates under certain restrictions on investment policy. These
policies, including the policies indicated below under "Investment in Foreign
Securities", "Investment in Warrants", and "Restricted Securities", are
fundamental policies, which cannot be changed without the vote of the holders of
a majority of the Fund's outstanding shares. Under these restrictions, the
Fund cannot:
(a) Deviate from any percentage restrictions set forth below under
"Investment in Foreign Securities", "Investment in Warrants", and "Restricted
Securities";
(b) Invest in physical commodities, or contracts for the purchase or sale
of physical commodities;
(c) Invest in real estate, or unmarketable securities of real estate
investment trusts or real estate mortgages as such; however, the Fund may
purchase the marketable securities of a real estate investment trust;
(d) Purchase securities on margin;
(e) Make short sales of securities except "short sales against-the-box"; in
such a short sale at all times during which a short position is open the Fund
must own an equal amount of such securities, or by virtue of ownership of
securities have the unconditional right, without delay and without payment of
further consideration, to obtain an equal amount of the securities sold short;
no more than 15% of the Fund's net assets (taken at market or other current
values) will be held as collateral for such sales at any one time;
(f) Lend money, but the Fund may invest in all or a portion of an issue of
bonds, debentures, commercial paper, or other similar corporate obligations of
the type that are usually purchased by institutions, whether or not publicly
distributed; the Fund may also make loans of portfolio securities provided the
loan is collateralized in accordance with applicable regulatory requirements and
provided that immediately after any such loan the value of the securities loaned
does not exceed 25% of the total value of the Fund's assets; see "Loans of
Portfolio Securities" below.
(g) Underwrite securities of other companies, except insofar as it might be
deemed to be an underwriter for purposes of the Securities Act of 1933 in the
resale of any securities held in its own portfolio;
(h) Concentrate investments in any particular industry; therefore the Fund
will not purchase the securities of companies in any one industry if thereafter
more than 25% of the value of its assets would consist of securities of
companies in that industry;
(i) Borrow in excess of 10% of the value of its assets, and then only as a
temporary measure for extraordinary or emergency purposes and only in special
cases and for a short time; no assets of the Fund, including its securities or
receivables, may be pledged, mortgaged or otherwise encumbered, transferred or
assigned to secure a debt. For the purpose of this limitation the deposit of
cash, cash equivalents, portfolio securities or other assets in a segregated
account with the Fund's custodian, sub-custodian or transfer agent in connection
with any of the Fund's investment transactions is not considered a pledge of
assets. To the extent that the Fund purchases additional portfolio securities
while such borrowings are outstanding, the Fund may be considered to be
leveraging its assets, which entails the risks that the costs of borrowing may
exceed the return from the securities purchased. (The Fund anticipates paying
interest on borrowed money at rates comparable to its yield and the Fund has no
intention of attempting to increase its net income by means of borrowing);
(j) Invest in or hold securities of any issuer if those officers and
Trustees or directors of the Fund or its adviser beneficially owning
individually more than 1/2 of 1% of the securities of such issuer together own
more than 5% of the securities of such issuer;
(k) Write, purchase or sell puts, calls or combinations thereof, except that
it may purchase or write put or call options on futures contracts and may write
call options on securities which the Fund owns and it may purchase call options
only to close out a position acquired through the writing of such options. Any
call options on securities written or purchased must be listed on a domestic
securities exchange and, at the time any such option is written, no more than
15% of the total assets of the Fund may be subject to call options;
(l) Invest more than 5% of the value of its total assets taken at market
value at time of purchase, in the securities of any one issuer (not including
government securities) nor acquire more than 10% of the outstanding voting
securities or more than 10% of the total value of all outstanding securities of
any one issuer;
(m) Invest in securities of other investment companies or investment
funds, domestic or foreign;
(n) Invest more than 5% of the value of its total assets (at the time of
purchase) in securities of companies that have operated less than three years,
including the operations of predecessors, and in equity securities (other than
restricted securities) which are not readily marketable; or
(o) Invest in interests in oil, gas, or other mineral exploration or
development programs.
For the purpose of investment limitations (d), (e) and (i), the arrangements
(including escrow, margin and collateral arrangements) made by the Fund with
respect to its transactions in all types of options, futures contracts, options
on futures contracts and forward contracts shall not be considered to be (i) a
borrowing of money or the issuance of securities (including senior securities)
by the Fund, (ii) a pledge of its assets, (iii) the purchase of a security on
margin or (iv) a short sale.
In order to permit the sale of shares of the Fund in certain states the Fund
may make commitments more restrictive than the policies described above. Should
the Fund determine that any such commitment is no longer in the best interests
of the Fund and its shareholders, it will revoke the commitment by terminating
sales of its shares in the state(s) involved.
OTHER INVESTMENT FEATURES
LOAN INTERESTS
A loan in which the Fund may acquire a loan interest (a "Loan Interest") is
typically originated, negotiated and structured by a U.S. or foreign commercial
bank, insurance company, finance company or other financial institution (the
"Agent") for a lending syndicate of financial institutions. The Agent typically
administers and enforces the loan on behalf of the other lenders in the
syndicate. In addition, an institution, typically but not always the Agent (the
"Collateral Bank"), holds collateral (if any) on behalf of the lenders. These
Loan Interests may take the form of participation interests in, assignments of
or novations of a loan during its secondary distribution, or direct interests
during a primary distribution. Such Loan Interests may be acquired from U.S. or
foreign banks, insurance companies, finance companies or other financial
institutions who have made loans or are members of a lending syndicate or from
other holders of Loan Interests. The Fund may also acquire Loan Interests under
which the Fund derives its rights directly from the borrower. Such Loan
Interests are separately enforceable by the Fund against the borrower and all
payments of interest and principal are typically made directly to the Fund from
the borrower. In the event that the Fund and other lenders become entitled to
take possession of shared collateral, it is anticipated that such collateral
would be held in the custody of a Collateral Bank for their mutual benefit. The
Fund may not act as an Agent, a Collateral Bank, a guarantor or sole negotiator
or structurer with respect to a loan.
The Investment Adviser will analyze and evaluate the financial condition of
the borrower in connection with the acquisition of any Loan Interest. Eaton
Vance also analyzes and evaluates the financial condition of the Agent and, in
the case of Loan Interests in which the Fund does not have privity with the
borrower, those institutions from or through whom the Fund derives its rights in
a loan (the "Intermediate Participants"). From time to time Eaton Vance and its
affiliates may borrow money from various banks in connection with their business
activities. Such banks may also sell interests in loans to or acquire such
interests from the Fund or may be Intermediate Participants with respect to
loans in which the Fund owns interests. Such banks may also act as Agents for
loans in which the Fund owns interests.
In a typical loan the Agent administers the terms of the loan agreement. In
such cases, the Agent is normally responsible for the collection of principal
and interest payments from the borrower and the apportionment of these payments
to the credit of all institutions which are parties to the loan agreement. The
Fund will generally rely upon the Agent or an Intermediate Participant to
receive and forward to the Fund its portion of the principal and interest
payments on the loan. Furthermore, unless under the terms of a participation
agreement the Fund has direct recourse against the borrower, the Fund will rely
on the Agent and the other members of the lending syndicate to use appropriate
credit remedies against the borrower. The Agent is typically responsible for
monitoring compliance with covenants contained in the loan agreement based upon
reports prepared by the borrower. The seller of the Loan Interest usually does,
but is often not obligated to, notify holders of Loan Interests of any failures
of compliance. The Agent may monitor the value of the collateral and, if the
value of the collateral declines, may accelerate the loan, may give the borrower
an opportunity to provide additional collateral or may seek other protection for
the benefit of the participants in the loan. The Agent is compensated by the
borrower for providing these services under a loan agreement, and such
compensation may include special fees paid upon structuring and funding the loan
and other fees paid on a continuing basis. With respect to Loan Interests for
which the Agent does not perform such administrative and enforcement functions,
the Fund will perform such tasks on its own behalf, although a Collateral Bank
will typically hold any collateral on behalf of the Fund and the other lenders
pursuant to the applicable loan agreement.
A financial institution's appointment as Agent may usually be terminated in
the event that it fails to observe the requisite standard of care or becomes
insolvent, enters Federal Deposit Insurance Corporation ("FDIC") receivership,
or, if not FDIC insured, enters into bankruptcy proceedings. A successor Agent
would generally be appointed to replace the terminated Agent, and assets held by
the Agent under the loan agreement should remain available to holders of Loan
Interests. However, if assets held by the Agent for the benefit of the Fund were
determined to be subject to the claims of the Agent's general creditors, the
Fund might incur certain costs and delays in realizing payment on a loan
interest, or suffer a loss of principal and/or interest. In situations involving
Intermediate Participants similar risks may arise.
Purchasers of Loan Interests depend primarily upon the creditworthiness of
the borrower for payment of principal and interest. If the Fund does not receive
scheduled interest or principal payments on such indebtedness, the Fund's share
price and yield could be adversely affected. Loans that are fully secured offer
the Fund more protections than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral can be liquidated. Indebtedness of borrowers
whose creditworthiness is poor involves substantially greater risks, and may be
highly speculative. Borrowers that are in bankruptcy or restructuring may never
pay off their indebtedness, or may pay only a small fraction of the amount owed.
Direct indebtedness of developing countries will also involve a risk that the
governmental entities responsible for the repayment of the debt may be unable,
or unwilling, to pay interest and repay principal when due.
The Fund limits the amount of total assets that it will invest in any one
issuer or in issuers within the same industry. See investment limitations (h)
and (l) above. For purposes of these restrictions, the Fund generally will treat
the borrower as the "issuer" of a Loan Interest held by the Fund. In the case of
loan participations where the Agent or Intermediate Participant serves as
financial intermediary between the Fund and the borrower, the Fund, in
appropriate circumstances, will treat both the Agent or Intermediate Participant
and the borrower as "issuers" for the purposes of determining whether the Fund
has invested more than 5% of its total assets in a single issuer. Treating a
financial intermediary as an issuer of indebtedness may restrict the Fund's
ability to invest in indebtedness related to a single intermediary, or a group
of intermediaries engaged in the same industry, even if the underlying borrowers
represent many different companies and industries.
LOANS OF PORTFOLIO SECURITIES
The Fund may, to increase its income, lend its securities if the loan is
collateralized in accordance with applicable regulatory requirements (the
"Guidelines") and if, after any loan, the value of the securities loaned does
not exceed 25% of the value of its assets. Under the present Guidelines (which
are subject to change) the loan collateral must, on each business day, at least
equal the value of the loaned securities and must consist of cash, bank letters
of credit or securities of the U.S. Government (or its agencies or
instrumentalities) maturing in one year or less from the date deposited. To be
acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by the Fund if the demand meets the terms of the letter. Such terms and
the issuing bank would have to be satisfactory to the Fund. Any loan might be
secured by any one or more of the three types of collateral.
The Fund receives amounts equal to the dividends or interest on loaned
securities and also receives one or more of negotiated loan fees, interest on
securities used as collateral or interest on short-term debt securities
purchased with such collateral, either of which type of interest may be shared
with the borrower. The Fund may also pay reasonable finders', custodian and
administrative fees. The terms of the Fund's loans meet certain tests under the
Internal Revenue Code and permit the Fund to reacquire loaned securities on five
days' notice or in time to vote on any serious matter.
WRITING COVERED CALL OPTIONS
Call options ("calls") may be written, i.e., sold, by the Fund if (i)
thereafter not more than 25% of total assets are subject to calls; (ii) the
calls are listed on a domestic securities exchange; and (iii) the calls are
covered, i.e., the Fund owns the securities subject to the call (or other
securities acceptable for escrow arrangements) while the call is outstanding.
When the Fund writes a call it receives a premium and agrees to sell the
callable securities to a purchaser of a call during the call period (not more
than 9 months) at a fixed exercise price (which may be different from the market
price) regardless of market price changes during the call period. Thus, the Fund
foregoes any possible profit from an increase in market price over the exercise
price.
The Fund may purchase calls only in a "closing purchase transaction" to
terminate its call obligation; a profit or loss will be realized depending upon
whether the premium previously received is more or less than the price of the
call purchased. Such profits may be considered, in whole or in part, short-term
capital gains for tax purposes, as may be premiums on lapsed calls and certain
mark-to-market gains, and distributions by the Fund from any net short-term
capital gains are taxable as ordinary income. If, due to a lack of a market, the
Fund cannot effect a closing purchase transaction, it would have to hold the
callable securities until the call lapses or is exercised.
Call writing may affect the Fund's turnover rate and the brokerage
commissions it pays. Commissions, normally higher than on general securities
transactions, are payable on writing or purchasing a call.
INVESTMENT IN FOREIGN SECURITIES
The Fund will only purchase foreign securities which are listed on a
domestic or foreign securities exchange or traded in the United States
over-the-counter market. The Fund will only hold foreign currency in connection
with the purchase or sale of securities on a foreign securities exchange. In
connection with purchases on foreign securities exchanges, the Fund may purchase
securities issued by companies in any country, developed or underdeveloped. The
Fund's income on foreign securities may be reduced by foreign taxes.
Investments in foreign companies involve certain considerations which are
not typically associated with investing in domestic companies. An investment may
be affected by changes in currency rates and in exchange control regulations
(e.g. currency blockage). The Fund may bear a transaction charge in connection
with the exchange of currency. There may be less publicly available information
about a foreign company than about a domestic company. Foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards comparable to those applicable to domestic companies. Most foreign
stock markets have substantially less volume than the New York Stock Exchange
and securities of some foreign companies are less liquid and more volatile than
securities of comparable domestic companies. There is generally less government
regulation of stock exchanges, brokers and listed companies than in the United
States. In addition, with respect to certain foreign countries there is a
possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect investments
in securities of issuers located in those countries. Individual foreign
economies may differ favorably or unfavorably from the United States economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. If it
should become necessary, the Fund would normally encounter greater difficulties
in commencing a lawsuit against the issuer of a foreign security than it would
against a United States issuer.
Generally, any trading in the foreign securities owned by the Fund is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of these securities used in determining the net
asset value of the Fund's shares are computed as of such times. Occasionally,
events affecting the value of foreign securities may occur between such times
and the close of the Exchange which will not be reflected in the computation of
the Fund's net asset value (unless the Fund deems that such events would
materially affect its net asset value, in which case an adjustment would be made
and reflected in such computation). Foreign securities and currency held by the
Fund will be valued in U.S. dollars.
INVESTMENT IN WARRANTS
The Fund may invest in warrants; however, not more than 5% of its assets (at
the time of purchase) will be invested in warrants other than warrants acquired
in units or attached to other securities. Of such 5% not more than 2% of assets
at the time of purchase may be invested in warrants that are not listed on the
New York or American Stock Exchanges. Warrants are pure speculation in that they
have no voting rights, pay no dividends and have no rights with respect to the
assets of the corporation issuing them. Warrants basically are options to
purchase equity securities at a specific price valid for a specific period of
time. They do not represent ownership of the securities, but only the right to
buy them. Warrants differ from calls in that warrants are issued by the same
issuer as the security which may be purchased on their exercise, whereas calls
may be written or issued by anyone. (See "Writing Covered Call Options" above).
The prices of warrants do not necessarily move parallel to the prices of the
underlying securities.
RESTRICTED SECURITIES
The Fund may invest in securities the disposition of which would be subject
to legal restrictions. It is expected that most securities of this nature
acquired by the Fund will be debt securities which are intended to help achieve
the Fund's primary objective of providing income. It may be difficult to sell
such securities at a price representing their fair value until such time as such
securities may be sold publicly. No restricted securities shall be acquired
without registration rights if such acquisition would cause more than 5% of the
value of the Fund's assets at the time of purchase to be invested in restricted
securities without such registration rights. As of the end of its last fiscal
year, the Fund owned no restricted securities without such registration rights.
Where registration is required, a considerable period may elapse between a
decision to sell the securities and the time when the Fund would be permitted to
sell. Thus, the Fund may not be able to obtain as favorable a price as that
prevailing at the time of the decision to sell. The Fund may also acquire
securities through private placements under which it may agree to contractual
restrictions on the resale of such securities. Such restrictions might prevent
their sale at a time when such sale would otherwise be desirable.
No restricted securities and no securities for which there is no readily
available market ("unmarketable securities") will be acquired which, at the time
of acquisition, will cause the aggregate current value of unmarketable
securities and restricted securities to exceed 10% of the Fund's net assets. As
of the end of its last fiscal year, the Fund had 3.7% of its net assets invested
in such securities.
FUTURES TRANSACTIONS
Futures Contracts. A change in the level of interest rates, currency exchange
rates or securities prices may affect the value of the Fund's portfolio
securities (or of securities that the Fund expects to purchase). To hedge
against changes in rates or prices, or for non-hedging purposes, the Fund may
enter into (i) futures contracts for the purchase or sale of securities and
currency, (ii) futures contracts on securities indices and (iii) futures
contracts on other financial instruments and indices. In the United States
futures contracts are traded on exchanges or boards of trade that are licensed
and regulated by the Commodity Futures Trading Commission ("CFTC"), and must be
executed through a futures commission merchant or brokerage firm which is a
member of the relevant contract market. The Fund may also enter into futures
contracts traded on a foreign exchange if it is determined by Eaton Vance that
trading on such exchange does not subject the Fund to risks, including credit
and liquidity risks, that are materially greater than the risks associated with
trading on United States exchanges.
Futures Contracts on Securities and Currency. A futures contract on a security
or a currency is a binding contractual commitment which, if held to maturity,
will result in an obligation to make or accept delivery, during a particular
month, of securities having a standardized face value and rate of return or of
the specified currency. By purchasing futures on securities or currencies, the
Fund will legally obligate itself to accept delivery of the underlying security
or currency and pay the agreed price; by selling futures on securities or
currency, it will legally obligate itself to make delivery of the security or
currency against payment of the agreed price.
Positions taken in the futures markets are not normally held to maturity,
but are instead liquidated through offsetting transactions which may result in a
profit or a loss. While the Fund's futures contracts on securities or currency
will usually be liquidated in this manner, it may instead make or take delivery
of the underlying securities or currency whenever it appears economically
advantageous for the Fund to do so. A clearing corporation associated with the
exchange on which futures on securities or currency are traded guarantees that,
if still open, the sale or purchase will be performed on the settlement date.
Futures Contracts on Securities Indices. Futures contracts on securities indices
or other indices do not require the physical delivery of securities, but merely
provide for profits and losses resulting from changes in the market value of a
contract to be credited or debited at the close of each trading day to the
respective accounts of the parties to the contract. On the contract's expiration
date a final cash settlement occurs and the futures positions is simply closed
out. Changes in the market value of a particular futures contract reflect
changes in the level of the index on which the futures contract is based.
Hedging Strategies. Hedging by use of futures contracts seeks to establish more
certainly than would otherwise be possible the effective price or rate of return
on portfolio securities or securities that the Fund proposes to acquire. The
Fund may, for example, take a "short" position in the futures market by selling
futures contracts in order to hedge against an anticipated rise in interest
rates or a decline in market prices or foreign currency exchange rates that
would adversely affect the value of the Fund's portfolio securities. Such
futures contracts may include contracts for the future delivery of securities
held by the Fund (or currency in which such securities are denominated) or
securities with characteristics similar to those of the Fund's portfolio
securities. If, in the opinion of the Investment Adviser, there is a sufficient
degree of correlation between price trends for the Fund's portfolio securities
and futures contracts based on other financial instruments, securities indices
or other indices, the Fund may also enter into such futures contracts as part of
its hedging strategy. Although under some circumstances prices of securities in
the Fund's portfolio may be more or less volatile than prices of such futures
contracts, the Investment Adviser will attempt to estimate the extent of this
difference in volatility based on historical patterns and to compensate for it
by having the Fund enter into a greater or lesser number of futures contracts or
by attempting to achieve only a partial hedge against price changes affecting
the Fund's securities portfolio. When hedging of this character is successful,
any depreciation in the value of portfolio securities will be substantially
offset by appreciation in the value of the futures position.
On other occasions, the Fund may take a "long" position by purchasing such
futures contracts. This would be done, for example, when the Fund anticipates
the subsequent purchase of particular securities when it has the necessary cash,
but expects the prices then available in the securities market or foreign
currency exchange rates to be less favorable than prices or rates that are
currently available.
Options on Futures Contracts. The Fund may purchase and write call and put
options on futures contracts which are traded on a United States exchange or
board of trade. An option on a futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during the option period. Upon exercise of
the option, the writer of the option is obligated to convey the appropriate
futures position to the holder of the option. If an option is exercised on the
last trading day before the expiration date of the option, a cash settlement
will be made in an amount equal to the difference between the closing price of
the futures contract and the exercise price of the option.
The Fund may use options on futures contracts for bona fide hedging purposes
as defined below or for non-hedging purposes subject to the limitations imposed
by CFTC regulations. If the Fund purchases a call (put) option on a futures
contract it benefits from any increase (decrease) in the value of the futures
contract, but is subject to the risk of decrease (increase) in value of the
futures contract. The benefits received are reduced by the amount of the premium
and transaction costs paid by the Fund for the option. If market conditions do
not favor the exercise of the option, the Fund's loss is limited to the amount
of such premium and transaction costs paid by the Fund for the option.
If the Fund writes a call (put) option on a futures contract, the Fund
receives a premium but assumes the risk of a rise (decline) in value in the
underlying futures contract. If the option is not exercised, the Fund gains the
amount of the premium, which may partially offset unfavorable changes in the
value of securities (or the currency in which such securities are denominated)
held or to be acquired for the Fund's portfolio. If the option is exercised, the
Fund will incur a loss, which will be reduced by the amount of the premium it
receives. However, depending on the degree of correlation between changes in the
value of its portfolio securities (or the currency in which they are
denominated) and changes in the value of futures positions, the Fund's losses
from writing options on futures may be partially offset by favorable changes in
the value of portfolio securities or in the cost of securities to be acquired.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
Limitations on the Use of Futures Contracts and Options on Futures Contracts.
The Fund will engage in futures and related options transactions for bona fide
hedging or non-hedging purposes as defined in or permitted by CFTC regulations.
The Fund will determine that the price fluctuations in the futures contracts and
options on futures used for hedging purposes are substantially related to price
fluctuations in securities (or the currency in which they are denominated) held
by the Fund or which it expects to purchase. Except as stated below, the Fund's
futures transactions will be entered into for traditional hedging purposes --
i.e., futures contracts will be sold to protect against a decline in the price
of securities that the Fund owns, or futures contracts will be purchased to
protect the Fund against an increase in the price of securities it intends to
purchase. As evidence of this hedging intent, the Fund expects that on 75% or
more of the occasions on which it takes a long futures (or option) position
(involving the purchase of futures contracts), the Fund will have purchased, or
will be in the process of purchasing, equivalent amounts of related securities
in the cash market at the time when the futures (or option) position is closed
out. However, in particular cases, when it is economically advantageous for the
Fund to do so, a long futures position may be terminated (or an option may
expire) without the corresponding purchase of securities. As an alternative to
compliance with the bona fide hedging definition, a CFTC regulation now permits
the Fund to elect to comply with a different test, under which the aggregate
initial margin and premiums required to establish non-hedging positions in
futures contracts and options on futures will not exceed 5% of the Fund's net
asset value after taking into account unrealized profits and losses on such
positions and excluding the in-the-money amount of such options. The Fund will
engage in transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the Internal
Revenue Code for maintaining its qualification as a regulated investment company
for Federal income tax purposes (see "Taxes").
The Fund will be required, in connection with transactions in futures
contracts and the writing of options on futures, to make margin deposits, which
will be held by the Fund's custodian for the benefit of the futures commission
merchant through whom the Fund engages in such futures and options transactions.
Cash or liquid high grade debt securities required to be segregated in
connection with a "long" futures position taken by the Fund will also be held by
the custodian in a segregated account and will be marked to market daily.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY FUTURES CONTRACTS AND OPTIONS
THEREON AND OPTIONS ON FOREIGN CURRENCIES
Transactions in futures and options on foreign currencies, are subject to
the risk of governmental actions affecting trading in or the prices of
currencies underlying such contracts, which could restrict or eliminate trading
and could have a substantial adverse effect on the value of positions held by
the Fund. In addition, the value of such positions could be adversely affected
by a number of other complex political and economic factors applicable to the
countries issuing the underlying currencies.
Further, unlike trading in most other types of instruments, there is no
systematic reporting of last sale information with respect to the foreign
currencies underlying futures contracts and options. As a result, the available
information on which the Fund's trading systems will be based may not be as
complete as the comparable data on which the Fund makes investment and trading
decisions in connection with securities and other transactions. Moreover,
because the foreign currency market is a global, twenty-four hour market, events
could occur on that market which will not be reflected in the forward, futures
or options markets until the following day, thereby preventing the Fund from
responding to such events in a timely manner.
PORTFOLIO TURNOVER
The Fund cannot accurately predict its portfolio turnover rate, but it is
anticipated that the annual turnover rate will generally not exceed 100%
(excluding turnover of securities having a maturity of one year or less). A 100%
annual turnover rate would occur, for example, if all the securities in the
portfolio were replaced once in a period of one year. A high turnover rate (100%
or more) necessarily involves greater expenses to the Fund. The Fund engages in
portfolio trading (including short-term trading) if it believes that a
transaction including all costs will help in achieving its investment objective
either directly by increasing income or indirectly by enhancing the Fund's net
asset value.
OFFICERS AND TRUSTEES OF THE FUND
The Fund's Trustees and officers are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company for
the last five years. Unless otherwise noted, the business address of each
Trustee and officer is 24 Federal Street, Boston, Massachusetts 02110, which is
also the address of Eaton Vance; Eaton Vance's wholly-owned subsidiary, Boston
Management and Research ("BMR"); Eaton Vance's parent, Eaton Vance Corp.
("EVC"); and of Eaton Vance's and BMR's trustee Eaton Vance, Inc. ("EV"). Eaton
Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees and
officers who are "interested persons" of the Fund, Eaton Vance, BMR, EVC or EV
as defined in the Investment Company Act of 1940 by virtue of their affiliation
with any one or more of the Fund, Eaton Vance, BMR, EVC or EV, are indicated by
an asterisk (*).
KENNETH C. KNIGHT (68), CHAIRMAN OF THE BOARD OF TRUSTEES
Consultant; prior to 1989, Division Manager, The Whale Oil Corp. of New
England (fuel oils and home heating). During the previous five years an
officer of various predecessor fuel oil and home heating companies which were
involved in takeovers.
Address: 588 Andover Street, Lowell, Massachusetts 01852
M. DOZIER GARDNER (61), PRESIDENT AND TRUSTEE*
President and Chief Executive Officer of Eaton Vance, BMR, EVC and EV, and
Director of EVC and EV. Director or Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (63), TRUSTEE
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New England,
Inc., since 1983. Director or Trustee of various investment companies managed
by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
ROBERT GLUCK (67), TRUSTEE
Management Consultant
Address: 6742 Via Regina, Boca Raton, Florida 33433
SAMUEL L. HAYES III (59), TRUSTEE
Jacob H. Schiff Professor of Investment Banking, Harvard University Graduate
School of Business Administration, Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard Business School, Soldiers Field Road, Boston, Massachusetts
02163
JEROME PRESTON, JR. (72), TRUSTEE
Partner, Foley, Hoag & Eliot (law firm). A Trustee of University Hospital.
Address: One Post Office Square, Boston, Massachusetts 02110
NORTON H. REAMER (59), TRUSTEE
President and Director, United Asset Management Corporation (a holding company
owning institutional investment management firms); Chairman, President and
Director, The Regis Fund, Inc. (mutual fund). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (68), TRUSTEE
Director, Fiduciary Trust Company; Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
HOOKER TALCOTT (52), VICE PRESIDENT*
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (49), TREASURER*
Vice President of Eaton Vance, BMR and EV. Officer of various other investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (63), SECRETARY*
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
BARBARA E. CAMPBELL (37), ASSISTANT TREASURER*
Assistant Vice President of Eaton Vance and EV since January 17, 1992 and of BMR
since August 11, 1992, employee of Eaton Vance since October 23, 1991. Audit
Manager -- Financial Services Industry Practice, Deloitte & Touche
(1987-1991). Officer of various investment companies managed by Eaton Vance or
BMR. Ms. Campbell was elected Assistant Treasurer of the Fund on December
16, 1991.
JANET E. SANDERS (59), ASSISTANT TREASURER AND ASSISTANT SECRETARY*
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR. Ms. Sanders was elected Assistant
Treasurer and Assistant Secretary of the Fund on April 18, 1989.
Messrs. Gluck, Knight and Thorndike are members of the Special Committee of
the Board of Trustees of the Fund. The Special Committee's functions include a
continuous review of the Fund's contractual relationship with the investment
adviser, making recommendations to the Trustees regarding the compensation of
those Trustees who are not members of the investment adviser's organization, and
making recommendations to the Trustees regarding candidates to fill vacancies,
as and when they occur, in the ranks of those Trustees who are not "interested
persons" of the Fund or the investment adviser.
Messrs. Dwight and Preston are members of the Audit Committee of the Board
of Trustees. The Audit Committee's functions include making recommendations to
the Trustees regarding the selection of the independent accountants, and
reviewing with such accountants and the Treasurer of the Fund matters relative
to accounting and auditing practices and procedures, accounting records,
internal accounting controls, and the functions performed by the custodian,
transfer agent and dividend disbursing agent of the Fund.
The fees and expenses of those Trustees of the Fund who are not members of
the Eaton Vance organization are paid by the Fund. During the fiscal year ended
September 30, 1994, the Trustees of the Fund earned the following compensation
in their capacities as Trustees from the Fund and other funds in the Eaton Vance
fund complex:
AGGREGATE RETIREMENT TOTAL COMPENSATION
COMPENSATION BENEFIT ACCRUED FROM FUND AND
NAME FROM FUND FROM FUND COMPLEX FUND COMPLEX(1)
- ---- ------------ ----------------- ------------------
Donald R. Dwight .......... $ 1,131 --0-- $132,500
Robert Gluck .............. 10,000 --0-- 10,000
Samuel L. Hayes, III ...... 1,091 --0-- 140,000
Kenneth C. Knight ......... 10,000 --0-- 10,000
Jerome Preston Jr ......... 9,200 --0-- 9,200
Norton H. Reamer .......... 1,050 --0-- 132,500
John L. Thorndike ......... 1,079 --0-- 137,000
- ---------
(1) The Eaton Vance fund complex consists of 201 registered investment companies
or series thereof. Messrs. Gluck, Knight and Preston serve only on the Board
of Trustees of the Fund.
Trustees of the Fund that are not affiliated with the Investment Adviser may
elect to defer receipt of all or a percentage of their annual fees in accordance
with the terms of a Trustees Deferred Compensation Plan (the "Plan"). Under the
Plan, an eligible Trustee may elect to have his deferred fees invested by the
Fund in the shares of one or more funds in the Eaton Vance Family of Funds, and
the amount paid to the Trustees under the Plan will be determined based upon the
performance of such investments. Deferral of Trustees' fees in accordance with
the Plan will have a negligible effect on the Fund's assets, liabilities, and
net income per share, and will not obligate the Fund to retain the services of
any Trustee or obligate the Fund to pay any particular level of compensation to
the Trustee.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of December 31, 1994, the Trustees and officers of the Fund, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
that same date, Merrill Lynch, Pierce, Fenner & Smith, Inc. was the record owner
of approximately 8.4% of the outstanding shares, which it held on behalf of its
customers who are the beneficial owners of such shares, and as to which it had
voting power under certain limited circumstances. To the Fund's knowledge, no
other person owns of record or beneficially 5% or more of the outstanding shares
of the Fund.
INVESTMENT ADVISER
The Fund engages Eaton Vance as its investment adviser pursuant to an
investment advisory agreement originally made on May 22, 1989 and re-executed on
November 1, 1990. Eaton Vance or its affiliates acts as investment adviser to
investment companies and various individual and institutional clients with
combined assets under management of approximately $15 billion. Eaton Vance is a
wholly-owned subsidiary of EVC, a holding company.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. It maintains a large staff of experienced fixed-income and
equity investment professionals to service the needs of its clients. The
fixed-income division focuses on all kinds of taxable investment-grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Under the investment advisory agreement Eaton Vance receives a monthly
advisory fee of 5/96 of 1% (equivalent to 5/8 of 1% annually) of average monthly
net assets of the Fund. For the fiscal year ended September 30, 1994, the Fund
paid Eaton Vance an advisory fee of $645,516. The Fund paid Eaton Vance an
advisory fee of $554,722 for the fiscal year ended September 30, 1993 and
$487,499 for the fiscal year ended September 30, 1992.
As investment adviser to the Fund, Eaton Vance manages the Fund's
investments and administers its affairs, subject to the supervision of the Board
of Trustees of the Fund. Pursuant to the investment advisory agreement Eaton
Vance furnishes for the use of the Fund office space and all necessary office
facilities, equipment and personnel for servicing the investments of the Fund,
and compensates all officers and Trustees of the Fund who are members of the
Eaton Vance organization and all personnel of Eaton Vance performing services
relating to research and investment activities. The Fund has agreed to pay all
expenses not expressly stated to be payable by Eaton Vance under the investment
advisory agreement, which expenses payable by the Fund include, without implied
limitation, expenses of maintaining the Fund and continuing its existence,
registration of the Fund under the Investment Company Act of 1940, commissions,
fees and other expenses connected with the purchase or sale of securities,
auditing, accounting and legal expenses, taxes and interest, governmental fees,
expenses of issue, sale, repurchase and redemptions of shares, expenses of
registering and qualifying the Fund and its shares under federal and state
securities laws and of preparing and printing prospectuses for such purposes and
for distributing the same to shareholders and investors, expenses of reports and
notices to shareholders and of meetings of shareholders and proxy solicitations
therefor, expenses of reports to governmental officers and commissions,
insurance expenses, association membership dues, fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds and securities, keeping of
books and accounts and determination of net asset values), fees, expenses and
disbursements of transfer agents, dividend disbursing agents and registrars for
all services to the Fund, expenses for servicing shareholder accounts, any
direct charges to shareholders approved by the Trustees of the Fund,
compensation and expenses of Trustees of the Fund who are not members of the
Eaton Vance organization, and such non-recurring items as may arise, including
expenses incurred in connection with litigation, proceedings and claims and the
obligation of the Fund to indemnify its Trustees and officers with respect
thereto.
The Fund is responsible for all expenses for servicing shareholder accounts,
and Eaton Vance performs on behalf of the Fund various functions which relate to
the administration and servicing of existing shareholder accounts without being
reimbursed by the Fund for its costs in connection therewith. It is possible
that Eaton Vance may, in the future, request that the Trustees of the Fund take
action to have the Fund reimburse Eaton Vance for its costs in performing these
services. These services include functions which are primarily administrative
and clerical in nature, and include such matters as handling communications from
shareholders with respect to their accounts and the processing of liquidation
and exchange requests received from dealers or shareholders with respect to such
accounts. If any such request for reimbursement is made, the Trustees of the
Fund intend to review the specific nature and costs of these services prior to
approving any such reimbursement.
The investment advisory agreement with Eaton Vance remains in effect until
February 28, 1995; it may be continued indefinitely thereafter so long as such
continuance after February 28, 1995 is approved at least annually (i) by the
vote of a majority of the Trustees who are not interested persons of the Fund or
of Eaton Vance cast in person at a meeting specifically called for the purpose
of voting on such approval and (ii) by the Board of Trustees of the Fund or by
vote of a majority of the outstanding voting securities of the Fund. The
agreement may be terminated at any time without penalty on sixty days written
notice by the Board of Trustees of either party or by vote of the majority of
the outstanding voting securities of the Fund, and the agreement will terminate
automatically in the event of its assignment. The agreement provides that Eaton
Vance may render services to others and may permit other fund clients and other
corporations and organizations to use the words "Eaton Vance" or "Eaton &
Howard" or "Vance, Sanders" in their names. The agreement also provides that, in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties under the agreement on the part of Eaton
Vance, Eaton Vance shall not be liable to the Fund or to any shareholder for any
act or omission in the course of or connected with rendering services or for any
losses sustained in the purpose, holding or sale of any security.
A commitment has been made to a state securities authority that Eaton Vance
will take certain actions, if necessary, so that the Fund's expenses will not
exceed expense limitation requirements of such state. The commitment may be
amended or rescinded by Eaton Vance in response to changes in the requirements
of the state or for other reasons.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the Trustee of Eaton Vance and BMR. The
Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier Gardner,
James B. Hawkes and Benjamin A. Rowland, Jr. The Directors of EVC consist of the
same persons and John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman,
and Mr. Gardner is president and chief executive officer of EVC, Eaton Vance,
BMR and EV. All of the issued and outstanding shares of Eaton Vance and of EV
are owned by EVC. All of the issued and outstanding shares of BMR are owned by
Eaton Vance. All shares of the outstanding Voting Common Stock of EVC are
deposited in a Voting Trust which expires December 31, 1996, the Voting Trustees
of which are Messrs. Brigham, Clay, Gardner, Hawkes and Rowland. The Voting
Trustees have unrestricted voting rights for the election of Directors of EVC.
All of the outstanding voting trust receipts issued under said Voting Trust are
owned by certain of the officers of Eaton Vance and BMR who are also officers
and Directors of EVC and EV. As of December 31, 1994, Messrs. Clay, Gardner and
Hawkes each owned 24% of such voting trust receipts and Messrs. Rowland and
Brigham owned 15% and 13%, respectively, of such voting trust receipts. Messrs.
Gardner and Otis, who are officers or Trustees of the Fund are members of the
EVC, Eaton Vance, BMR and EV organizations. Messrs. Talcott, and O'Connor and
Ms. Campbell, and Ms. Sanders, are officers or Trustees of the Fund, and are
also members of the Eaton Vance, BMR and EV organizations. Eaton Vance will
receive the fees paid under the investment advisory agreement and its
wholly-owned subsidiary, Eaton Vance Distributors, Inc., as Principal
Underwriter, will receive its portion of the sales charge on shares of the Fund
sold through authorized firms.
Eaton Vance owns all of the stock of Energex Corporation, which is engaged
in oil and gas operations. EVC owns all of the stock of Marblehead Energy Corp.
(which engages in oil and gas operations) and owns 77.3% of the stock of
Investors Bank & Trust Company, which provides custodial, trustees and other
fiduciary services to investors, including individuals, employee benefit plans,
corporations, investment companies, savings banks and other institutions. In
addition, Eaton Vance owns all the stock of Northeast Properties, Inc., which is
engaged in real estate investment, consulting and management. EVC owns all of
the stock of Fulcrum Management, Inc. and MinVen, Inc., which are engaged in the
development of precious metal properties. EVC, Eaton Vance, BMR and EV may also
enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the Fund's custodian, Investors
Bank & Trust Company. It is Eaton Vance's opinion that the terms and conditions
of such transactions were not and will not be influenced by existing or
potential custodial or other relationships between the Fund and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 24 Federal Street, Boston,
Massachusetts (a 77.3% owned subsidiary of EVC) acts as custodian for the Fund.
IBT has the custody of all cash and securities of the Fund, maintains the Fund's
general ledger and computes the daily per share net asset value. In such
capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Fund's investments, receives
and disburses all funds, and performs various other ministerial duties upon
receipt of proper instructions from the Fund. IBT charges fees which are
competitive within the industry. A portion of the fee relates to custody,
bookkeeping and valuation services and is based upon a percentage of Fund net
assets and a portion of the fee relates to activity charges, primarily the
number of portfolio transactions. These fees are then reduced by a credit for
cash balances of the particular investment company at the custodian equal to 75%
of the 91-day U.S. Treasury Bill auction rate applied to the particular
investment company's average daily collected balances for the week. In view of
the ownership of EVC in IBT, the Fund is treated as a self-custodian pursuant to
Rule 17f-2 under the Investment Company Act of 1940, and the Fund's investments
held by IBT as custodian are thus subject to additional examinations by the
Fund's independent auditors as called for by such Rule. During the fiscal year
ended September 30, 1994 the Fund paid Investors Bank & Trust Company $79,935
under these arrangements.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts are
the independent accountants for the Fund, providing audit services, tax return
preparation, and assistance and consultation with respect to the preparation of
filings with the Securities and Exchange Commission.
SERVICES FOR ACCUMULATION
The following services are voluntary, involve no extra charge, other than
the sales charge included in the offering price, and may be changed or
discontinued without penalty at any time.
Invest-by-Mail--for periodic share accumulation. Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
may be mailed directly to The Shareholder Services Group, Inc., BOS725, P.O. Box
1559, Boston, MA 02104 at any time. The name of the shareholder and the account
number should accompany each investment.
Bank Draft Investing--for regular share accumulation. Cash investments of
$50 or more may be made through the shareholder's checking account via bank
draft each month or quarter. The $1,000 minimum initial investment and small
account redemption policy are waived for Bank Draft Investing accounts.
Intended Quantity Investment--Statement of Intention. If it is anticipated
that $100,000 or more of Fund shares and shares of the other continuously
offered open-end funds listed under "The Eaton Vance Exchange Privilege" in the
current prospectus of the Fund will be purchased within a 13-month period, a
Statement of Intention should be signed so that shares may be obtained at the
same reduced sales charge as though the total quantity were invested in one lump
sum. Shares held under Right of Accumulation (see below) as of the date of the
Statement will be included toward the completion of the Statement. The Statement
authorizes the Transfer Agent to hold in escrow sufficient shares (5% of the
dollar amount specified in the Statement) which can be redeemed to make up any
difference in sales charge on the amount intended to be invested and the amount
actually invested. Execution of a Statement does not obligate the shareholder to
purchase or the Fund to sell the full amount indicated in the Statement, and
should the amount actually purchased during the 13-month period be more or less
than that indicated on the Statement, price adjustments will be made. For sales
charges and other information on quantity purchases, see "How to Buy Fund
Shares" in the Fund's current prospectus. Any investor considering signing a
Statement of Intention should read it carefully.
Right of Accumulation--Cumulative Quantity Discount. The applicable sales
charge level for the purchase of Fund shares is calculated by taking the dollar
amount of the current purchase and adding it to the value (calculated at the
maximum current offering price) of the shares the shareholder owns in his
account(s) in the Fund and in the other continuously offered open-end funds
listed under "The Eaton Vance Exchange Privilege" in the current prospectus of
the Fund. The sales charge on the shares being purchased will then be at the
rate applicable to the aggregate. For example, if the shareholder owned shares
valued at $80,000 in EV Traditional Investors Fund, and purchased an additional
$20,000 of Fund shares, the sales charge for the $20,000 purchase would be at
the rate of 3.75% of the offering price (3.90% of the net amount invested) which
is the rate applicable to single transactions of $100,000. For sales charges on
quantity purchases, see "How to Buy Fund Shares" in the Fund's current
prospectus. Shares purchased (i) by an individual, his spouse and their children
under the age of twenty-one, and (ii) by a trustee, guardian or other fiduciary
of a single trust estate or a single fiduciary account, will be combined for the
purpose of determining whether a purchase will qualify for the Right of
Accumulation and if qualifying, the applicable sales charge levels.
For any such discount to be made available, at the time of purchase a
purchaser or his Authorized Firm must provide Eaton Vance Distributors, Inc.
(the "Principal Underwriter") (in the case of a purchase made through an
Authorized Firm) or the Transfer Agent (in the case of an investment made by
mail) with sufficient information to permit verification that the purchase order
qualifies for the accumulation privilege. Confirmation of the order is subject
to such verification. The Right of Accumulation privilege may be amended or
terminated at any time as to purchases occurring thereafter.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Fund's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any designated amount based
upon the value of the shares held. The checks will be drawn from share
redemptions and hence, although they are a return of principal, may give rise to
gain or loss for tax purposes. Income dividends and capital gain distributions
in connection with withdrawal accounts will be credited at net asset value as of
the record date for each distribution. Continued withdrawals in excess of
current income will eventually use up principal, particularly in a period of
declining market prices.
To use this service, at least $5,000 in cash or shares at the public
offering price (i.e., net asset value plus the applicable sales charge) will
have to be deposited with the Transfer Agent. The maintenance of a withdrawal
plan concurrently with purchases of additional Fund shares would be
disadvantageous because of the sales charge included in such purchases. A
shareholder may not have a withdrawal plan in effect at the same time he has
authorized Bank Draft Investing or is otherwise making regular purchases of Fund
shares. The shareholder, the transfer agent or the Principal Underwriter will be
able to terminate the withdrawal plan at any time without penalty.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security transactions,
including the selection of the market and the broker-dealer firm, are made by
Eaton Vance. Eaton Vance is also responsible for the execution of transactions
for all other accounts managed by it.
Eaton Vance places the portfolio security transactions of the Fund and of
all other accounts managed by it for execution with many broker-dealer firms.
Eaton Vance uses its best efforts to obtain execution of portfolio transactions
at prices which are advantageous to the Fund and (when a disclosed commission is
being charged) at reasonably competitive commission rates. In seeking such
execution, Eaton Vance will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors including
without limitation the size and type of the transaction, the general execution
and operational capabilities of the broker-dealer, the nature and character of
the market for the security, the confidentiality, speed and certainty of
effective execution required for the transaction, the reputation, reliability,
experience and financial condition of the broker-dealer, the value and quality
of the services rendered by the broker-dealer in other transactions, and the
reasonableness of the commission, if any. Transactions on United States stock
exchanges and other agency transactions involve the payment by the Fund of
negotiated brokerage commissions. Such commissions vary among different
broker-dealer firms, and a particular broker-dealer may charge different
commissions according to such factors as the difficulty and size of the
transaction and the volume of business done with the broker-dealer. Transactions
in foreign securities usually involve the payment of fixed brokerage
commissions, which are generally higher than those in the United States. There
is generally no stated commission in the case of securities traded in the
over-the-counter markets, but the price paid or received by the Fund usually
includes an undisclosed dealer markup or markdown. In an underwritten offering,
the price paid by the Fund often includes a disclosed fixed commission or
discount retained by the underwriter or dealer. Although commissions paid on
portfolio security transactions will, in the judgment of Eaton Vance, be
reasonable in relation to the value of the services provided, commissions
exceeding those which another firm might charge may be paid to broker-dealers
who were selected to execute transactions on behalf of the Fund and Eaton
Vance's other clients for providing brokerage and research services to Eaton
Vance.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Fund may
receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if Eaton
Vance determines in good faith that such compensation was reasonable in relation
to the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which Eaton Vance and its affiliates have for
accounts over which they exercise investment discretion. In making any such
determination, Eaton Vance will not attempt to place a specific dollar value on
the brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts; effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement); and
the "Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealer firms which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, Eaton Vance receives Research Services from many broker-dealer firms
with which Eaton Vance places the Fund's portfolio transactions and from third
parties with which these broker-dealers have arrangements. These Research
Services, include such matters as general economic and market reviews, industry
and company reviews, evaluations of securities and portfolio strategies and
transactions, recommendations as to the purchase and sale of securities and
other portfolio transactions, financial, industry and trade publications, news
and information services, pricing and quotation equipment and services, and
research oriented computer hardware, software, data bases and services. Any
particular Research service obtained through a broker-dealer may be used by
Eaton Vance in connection with client accounts other than those accounts which
pay commissions to such broker-dealer. Any such Research Service may be broadly
useful and of value to Eaton Vance in rendering investment advisory services to
all or a significant portion of its clients, or may be relevant and useful for
the management of only one client's account or of a few clients' accounts, or
may be useful for the management of merely a segment of certain clients'
accounts, regardless of whether any such account or accounts paid commissions to
the broker-dealer through which such Research Service was obtained. The advisory
fee paid by the Fund is not reduced because Eaton Vance receives such Research
Services. Eaton Vance evaluates the nature and quality of the various Research
Services obtained through broker-dealer firms and attempts to allocate
sufficient commissions to such firms to ensure the continued receipt of Research
Services which Eaton Vance believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek to execute Fund portfolio security transactions at advantageous prices and
at reasonably competitive commission rates or spreads, Eaton Vance is authorized
to consider as a factor in the selection of any broker-dealer firm with whom
Fund portfolio orders may be placed the fact that such firm has sold or is
selling shares of the Fund or of other investment companies sponsored by Eaton
Vance. This policy is not inconsistent with a rule of the National Association
of Securities Dealers, Inc., which rule provides that no firm which is a member
of the Association shall favor or disfavor the distribution of shares of any
particular investment company or group of investment companies on the basis of
brokerage commissions received or expected by such firm from any source.
Securities considered as investments for the Fund may also be appropriate
for other investment accounts managed by Eaton Vance or its affiliates. Eaton
Vance will attempt to allocate equitably portfolio security transactions among
the Fund and the portfolios of its other investment accounts whenever decisions
are made to purchase or sell securities by the Fund and one or more of such
other accounts simultaneously. In making such allocations, the main factors to
be considered are the respective investment objectives of the Fund and such
other accounts, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Fund and
such accounts, the size of investment commitments generally held by the Fund and
such accounts and the opinions of the persons responsible for recommending
investments to the Fund and such accounts. While this procedure could have a
detrimental effect on the price or amount of the securities available to the
Fund from time to time, it is the opinion of the Trustees that the benefits
available from the Eaton Vance organization outweigh any disadvantage that may
arise from exposure to simultaneous transactions.
During the Fund's fiscal year ended September 30, 1994, the Fund paid no
brokerage commissions. During the fiscal years ended September 30, 1993 and
1992, the Fund paid brokerage commissions of $1,049 and $494, respectively, on
portfolio transactions.
DETERMINATION OF NET ASSET VALUE
For a description of how the Fund values its shares, see "Valuing Fund
Shares" in the Fund's current prospectus. The Fund will be closed for business
and will not price its shares on the following business holidays: New Year's
Day, Washington's Birthday, Good Friday (a New York Stock Exchange holiday),
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
INVESTMENT PERFORMANCE
The average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound rate of return
(including capital appreciation/depreciation, and dividends and distributions
paid and reinvested) for the stated period and annualizing the result. The
calculation assumes the maximum sales charge is deducted from the initial $1,000
purchase order and that all dividends and distributions are reinvested at net
asset value on the reinvestment dates during the period. The Fund's average
annual total return for the ten year period ended September 30, 1994 was 11.64%.
The Fund's yield is computed pursuant to a standardized formula by dividing
its net investment income per share earned during a recent thirty-day period by
the maximum offering price (including the maximum sales load) per share on the
last day of the period and annualizing the resulting figure. Net investment
income per share is equal to the Fund's dividends and interest earned during the
period, reduced by accrued expenses for the period with the resulting number
being divided by the average daily number of shares outstanding and entitled to
receive dividends during the period. Yield calculations assume a maximum sales
charge equal to 4.75% of the public offering price. Actual yield may be affected
by variations in sales charges on investments. For the thirty-day period ended
September 30, 1994 the yield of the Fund was 10.21%.
The Fund may also publish its distribution rate and/or its effective
distribution rate. The Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized, by the current net asset value
per share. The Fund's effective distribution rate is computed by dividing the
distribution rate by the ratio used to annualize the distribution and
reinvesting the resulting amount for a full year on the basis of such ratio. The
effective distribution rate will be higher than the distribution rate because of
the compounding effect of the assumed reinvestment. Investors should note that
the Fund's yield is calculated using a standardized formula the income component
of which is computed from the yields to maturity of all debt obligations in the
Fund's portfolio based on the market value of such obligations and from
dividends from equity securities based on stated annual rates, exclusive of
special or extra distributions, (with all purchases and sales of securities
during such period included in the income calculation on a settlement date
basis), whereas the distribution rate is based on the Fund's last monthly
distribution which tends to be relatively stable and may be more or less than
the amount of net investment income and short-term capital gain actually earned
by the Fund during the month. The Fund's distribution rate (calculated on
September 30, 1994 and based on the Fund's monthly distribution paid September
30, 1994) was 10.01%, and the Fund's effective distribution rate (calculated on
the same date and based on the same monthly distribution) was 10.49%.
The table below indicates the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the ten year period ended September 30, 1994.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
TOTAL RETURN TOTAL RETURN
VALUE OF EXCLUDING SALES CHARGE<F1> INCLUDING SALES CHARGE<F2>
INVESTMENT AMOUNT OF INVESTMENT ------------------------- ------------------------
INVESTMENT PERIOD DATE INVESTMENT* ON 9/30/94 CUMULATIVE ANNUALIZED CUMULATIVE ANNUALIZED
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
10 Years Ended 9/30/94 9/30/84 $ 952.97 $ 3,009.78 215.83% 12.19% 200.83% 11.64%
5 Years Ended 9/30/94 9/30/89 $ 952.18 $ 1,551.74 62.97% 10.26% 55.23% 9.19%
1 Year Ended 9/30/94 9/30/93 $ 952.38 $ 992.85 4.25% 4.25% -0.70% -0.70%
<FN>
- ---------
<F1> Initial investment less the current maximum sales charge of 4.75%.
<F2> Based on current maximum sales charge of 4.75%
</TABLE>
<TABLE>
PERCENTAGE CHANGES DURING THE TEN YEAR PERIOD ENDED 9/30/94
<CAPTION>
NET ASSET VALUE MAXIMUM OFFERING PRICE
TO NET ASSET VALUE WITH ALL DISTRIBUTIONS REINVESTED TO NET ASSET VALUE WITH ALL DISTRIBUTIONS REINVESTED
FISCAL ---------------------------------------------------- -----------------------------------------------------
YEAR AVERAGE AVERAGE
ENDED ANNUAL CUMULATIVE ANNUAL ANNUAL CUMULATIVE ANNUAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
9/30/85 21.86% 21.86% 21.86% 16.07% 16.07% 16.07%
9/30/86 19.26 45.33 20.55 13.59 38.42 17.65
9/30/87 11.11 61.46 17.32 5.83 53.79 15.43
9/30/88 9.35 76.56 15.27 4.16 68.18 13.88
9/30/89 9.76 93.80 14.15 4.55 84.59 13.04
9/30/90 -13.06 68.48 9.08 -17.19 60.48 8.20
9/30/91 28.54 116.57 11.67 22.43 106.28 10.90
9/30/92 24.25 169.09 13.17 18.35 156.31 12.49
9/30/93 12.59 202.96 13.11 7.24 188.57 12.50
9/30/94 4.25 215.83 12.19 -0.70 200.83 11.64
</TABLE>
Past performance is not indicative of future results. Investment return and
principal value will fluctuate and shares, when redeemed, may be worth more or
less than their original cost.
The Fund's total return may be compared to the Consumer Price Index and
various domestic securities indices. The Fund's total return and comparisons
with these indices may be used in advertisements and in information furnished to
present or prospective shareholders.
From time to time, evaluations of the Fund's performance made by independent
sources, e.g. Lipper Analytical Services, Inc., CDA/Wiesenberger and
Morningstar, Inc., may be used in advertisements and in information furnished to
present or prospective shareholders.
From time to time, information showing the effects of compounding interest
may be included in advertisements and other material furnished to present and
prospective shareholders. Compounding is the process of earning interest on
principal plus interest that was earned earlier. Interest can be compounded
annually, semi-anually, quarterly or daily, e.g. $1,000 compounded annually at
9% will grow to $1,090 at the end of the first year and $1,188 at the end of the
second year. The extra $8, which was earned on the $90 interest from the first
year is the compound interest. $1,000 compounded annually at 9% grows to $2,367
at the end of 10 years and $5,604 at the end of 20 years. Other examples of
compounding $1,000 annually are 7% grows to $1,967 at the end of 10 years and
$3,870 at the end of 20 years. At 12% the $1,000 grows to $3,106 at the end of
10 years and $9,646 at the end of 20 years. All of these examples are for
illustrative purposes only and are not meant to indicate performance of the
Fund.
From time to time, information, charts and illustrations relating to
inflation and the effects of inflation on the dollar may be included in
advertisements and other material furnished to present and prospective
shareholders. For example: After 10 years, the purchasing power of $25,000 would
shrink to $16,621, $14,968, $13,465 and $12,100, respectively, if the annual
rates of inflation during such period were 4%, 5%, 6% and 7%, respectively. (To
calculate the purchasing power, the value at the end of each year is reduced by
the above inflation rates for 10 consecutive years.)
From time to time, information, charts and illustrations showing comparative
historical information of high-yielding bonds as represented by The First Boston
High Yield Index over 10-year U.S. Treasury bonds may be used in advertisements
and other material furnished to present or prospective shareholders. The First
Boston High Yield Index is an unmanaged index of 423 high-yielding securities
with an average life of 8.4 years, an average maturity of 9.0 years and an
average coupon of 11.22%. The principal and interest of U.S. Treasury bonds are
guaranteed by the U.S. Government, while high yield bonds, sometimes referred to
as "junk bonds," are of lower quality than investment-grade bonds and U.S.
Government securities.
Information used in advertisements and in materials furnished to present and
prospective shareholders may include statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds which may be employed
to meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents. These three
financial goals may be referred to in such advertisements or materials as the
"Triple Squeeze."
TAXES
See "Distributions and Taxes" in the Fund's current prospectus.
The Fund has elected to be treated, has qualified, and intends to continue
to qualify each year as a regulated investment company under the Internal
Revenue Code (the "Code"). Accordingly, the Fund intends to satisfy certain
requirements relating to sources of its income and diversification of its assets
and to distribute all of its net investment income and net realized capital
gains in accordance with the timing requirements imposed by the Code, so as to
avoid any Federal income or excise tax to the Fund. The Fund so qualified for
its fiscal year ended September 30, 1994 (see Note 1C to Financial Statements).
In order to avoid Federal excise tax, the Code requires that the Fund
distribute (or be deemed to have distributed) by December 31 of each calendar
year at least 98% of its ordinary income (not including tax-exempt income) for
such year, at least 98% of the excess of its realized capital gains over its
realized capital losses generally computed on the basis of the one-year period
ending on October 31 of such year, after reduction by any available capital loss
carryforwards, and 100% of any income from the prior year (as previously
computed) that was not paid out during such year and on which the Fund paid no
Federal income tax. Under current law, provided the Fund qualifies as a
regulated investment company for Federal income tax purposes, the Fund is not
liable for any income, corporate excise or franchise tax in the Commonwealth of
Massachusetts.
The Fund's transactions in options, futures contracts and forward contracts
will be subject to special tax rules that may affect the amount, timing and
character of distributions to shareholders. For example, certain positions held
by the Fund on the last business day of each taxable year will be marked to
market (i.e., treated as if closed out on such day), and any resulting gain or
loss will, except for certain currency-related positions, generally be treated
as 60% long-term and 40% short-term capital gain or loss. Certain positions held
by the Fund that substantially diminish the Fund's risk of loss with respect to
other positions in its portfolio may constitute "straddles," which are subject
to tax rules that may cause deferral of Fund losses, adjustments in the holding
periods of Fund securities and conversion of short-term into long-term capital
losses. The Fund may have to limit its activities in options, futures contracts
and forward contracts in order to maintain its qualification as a regulated
investment company.
The Fund's investment in zero coupon and deferred interest securities,
payment in kind securities and any other securities with original issue discount
(or market discount, if an election is made to include earned market discount in
current income) will cause it to realize income prior to the receipt of cash
payments with respect to these securities. In order to distribute this income
and avoid a tax on the Fund, the Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold.
Distributions of net investment income, the excess of net short-term capital
gains over net long-term capital losses and certain foreign exchange gains are
taxable to shareholders as ordinary income, whether received in cash or
reinvested in additional shares. Distributions of the excess of net long-term
capital gains over net short-term capital losses (including any capital losses
carried forward from prior years) are taxable to shareholders as long-term
capital gains whether received in cash or in additional shares and regardless of
the length of time their shares of the Fund have been held. Certain
distributions declared in October, November or December and paid the following
January will be taxed to shareholders as if received on December 31 of the year
in which they are declared.
The portion of distributions made by the Fund which are derived from
dividends received by the Fund from domestic corporations may qualify for the
dividends-received deduction for corporations. The dividends-received deduction
for corporate shareholders is reduced to the extent the shares with respect to
which the dividends are received are treated as debt-financed under the Federal
income tax law and is eliminated if the shares are deemed to have been held for
less than a minimum period, generally 46 days. Receipt of certain distributions
qualifying for the deduction may result in reduction of the tax basis of the
corporate shareholder's shares.
Any loss realized upon the redemption or exchange of shares with a tax-
holding period of 6 months or less will be treated as a long-term capital loss
to the extent of any distribution of net long-term capital gains with respect to
such shares. In addition, a loss realized on a redemption of Fund shares will be
disallowed to the extent the shareholder acquired other Fund shares within the
period beginning 30 days before the redemption of the loss shares and ending 30
days after such date.
The Fund may be subject to foreign withholding or other foreign taxes with
respect to income (possibly including, in some cases, capital gains) on certain
foreign securities. As it is not expected that more than 50% of the value of the
total assets of the Fund at the close of any taxable year will consist of
securities issued by foreign corporations, the Fund will not be eligible to pass
through to shareholders any foreign tax credits or deductions for foreign taxes
paid by the Fund. These taxes may be reduced or eliminated under the terms of an
applicable U.S. income tax treaty. Certain foreign exchange gains and losses
realized by the Fund will be treated as ordinary income and losses. Certain uses
of foreign currency or currency derivatives and investment by the Fund in the
stock of certain "passive foreign investment companies" may be limited or a
tax-deduction may be made, if available, in order to avoid imposition of a tax
on the Fund.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain required certifications, as well as shareholders with respect to whom
the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of Federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges), at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and other
entities generally will be subject to a U.S. withholding tax at a rate of 30% on
the Fund's distributions from ordinary income and the excess of net short-term
capital gain over net long-term capital loss unless the tax is reduced or
eliminated by an applicable tax treaty. Distributions from the excess of the
Fund's net long-term capital gain over net short-term capital loss received by
such shareholders and any gain from the sale or other disposition of shares of
the Fund generally will not be subject to U.S. Federal income taxation, provided
that nonresident alien status has been certified by the shareholder. Different
U.S. tax consequences may result if the shareholder is engaged in a trade or
business in the United States, is present in the United States for a sufficient
period of time during a taxable year to be treated as a U.S. resident, or fails
to provide any required certifications regarding status as a non-resident alien
investor. Foreign shareholders should consult their tax advisers regarding the
U.S. and foreign tax consequences of an investment in the Fund.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and
other retirement plans and persons investing through such plans should consult
their tax advisers for more information.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to the special tax rules that may apply in
their particular situations, as well as the state, local or foreign tax
consequences of investing in the Fund.
PRINCIPAL UNDERWRITER
Shares of the Fund may be continuously purchased at the public offering
price through certain financial service firms ("Authorized Firms") which have
agreements with Eaton Vance Distributors, Inc., the Principal Underwriter. The
Principal Underwriter is a wholly-owned subsidiary of Eaton Vance. The public
offering price is the net asset value next computed after receipt of the order,
plus, where applicable, a variable percentage (sales charge) depending upon the
amount of purchase as indicated by the sales charge table set forth in the
prospectus. Such table is applicable to purchases of the Fund alone or in
combination with purchases of the other funds offered by the Principal
Underwriter, made at a single time by (i) an individual, or an individual, his
spouse and their children under the age of twenty-one, purchasing shares for his
or their own account; and (ii) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account.
The table is also presently applicable to (1) purchases of Fund shares,
alone or in combination with purchases of any of the other funds offered by the
Principal Underwriter through one dealer aggregating $100,000 or more made by
any of the persons enumerated above within a thirteen-month period starting with
the first purchase pursuant to a written Statement of Intention, in the form
provided by the Underwriter, which includes provisions for a price adjustment
depending upon the amount actually purchased within such period (a purchase not
made pursuant to such Statement may be included thereunder if the Statement is
filed within 90 days of such purchase); or (2) purchases of the Fund pursuant to
the Right of Accumulation and declared as such at the time of purchase.
Subject to the applicable provisions of the Investment Company Act of 1940,
the Fund may issue shares at net asset value in the event that an investment
company (whether a regulated or private investment company or a personal holding
company) is merged or consolidated with or acquired by the Fund. Normally no
sales charges will be paid in connection with an exchange of Fund shares for the
assets of such investment company.
Shares may be sold at net asset value to any officer, director, trustee,
general partner or employee of the Fund, or any investment company for which
Eaton Vance or Boston Management and Research acts as investment adviser, any
investment advisory, agency, custodial or trust account managed or administered
by Eaton Vance or by any parent, subsidiary or other affiliate of Eaton Vance,
or any officer, director or employee of any parent, subsidiary or other
affiliate of Eaton Vance. The terms "officer," "director," "trustee," "general
partner" or "employee" as used in this paragraph include any such person's
spouse and minor children, and also retired officers, directors, trustees,
general partners and employees and their spouses and minor children. Shares of
the Fund may also be sold at net asset value to registered representatives and
employees of Authorized Firms and to the spouses and children under the age of
21 and beneficial accounts of such persons.
The Fund reserves the right to suspend or limit the offering of shares to
the public at any time.
The Principal Underwriter acts as principal in selling shares of the Fund
under the distribution agreement with the Fund. The expenses of printing copies
of prospectuses used to offer shares to financial service firms or investors and
other selling literature and of advertising are borne by the Principal
Underwriter. The fees and expenses of qualifying and registering and maintaining
qualifications and registrations of the Fund and its shares under Federal and
state securities laws are borne by the Fund. The distribution agreement is
renewable annually by the Fund's Board of Trustees (including a majority of its
Trustees who are not interested persons of the Principal Underwriter or the
Fund), may be terminated on six months' notice by either party, and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold. The Principal Underwriter allows Authorized
Firms discounts from the applicable public offering price which are alike for
all Firms. In the case of the maximum sales charge the Authorized Firm retains
4% of the public offering price (4.20% of the net amount invested) and the
Principal Underwriter retains 0.75% of the public offering price (0.79% of the
net amount invested). However, the Principal Underwriter may allow at times,
discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
Firms may be deemed to be underwriters as that term is defined in the Securities
Act of 1933. The total sales charges for sale of shares of the Fund during the
fiscal years ended September 30, 1994, 1993 and 1992, were $456,053, $396,885
and $359,468, respectively, of which $71,474, $63,089 and $57,325, respectively,
was received by the Principal Underwriter. For the fiscal years ended September
30, 1994, 1993 and 1992, Authorized Firms received $384,579, $333,796 and
$302,143, respectively, from the total sales charges.
SERVICE PLAN
In addition to the fees and expenses described herein under "Investment
Adviser," the Fund has adopted a Service Plan (the "Plan") designed to meet the
requirements of Rule 12b-1 (the "Rule") under the Investment Company Act of 1940
and the service fee requirements of the revised sales charge rule of the
National Association of Securities Dealers, Inc. Pursuant to such Rule, the Plan
has been approved by the independent Trustees of the Fund, who have no direct or
indirect financial interest in the Plan and by all of the Trustees of the Fund.
The Plan amends and replaces the Fund's original distribution plan which was
approved by the Fund's shareholders. (Management believes service fee payments
are not distribution expenses governed by the Rule, but has chosen to have the
Plan approved as if the Rule were Applicable.)
The Plan provides that the Fund may make payments of service fees for
personal services and/or the maintenance of shareholder accounts to the
Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding .25% of the Fund's average daily net assets for any fiscal year. The
Trustees have implemented the Plan by authorizing the Fund to make quarterly
service fee payments to the Principal Underwriter and Authorized Firms in
amounts not expected to exceed .25% of the Fund's average daily net assets for
any fiscal year which is attributable to shares of the Fund sold on or after May
22, 1989 by such persons and remaining outstanding for at least twelve months.
The Plan remains in effect through April 28, 1995 and from year to year
thereafter, provided such continuance is approved by a vote of the Board of
Trustees and by a majority of (i) those Trustees who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or any agreements related to it (the "Rule 12b-1
Trustees") and (ii) all of the Trustees then in office, cast in person at a
meeting (or meetings) called for the purpose of voting on this Plan. The Plan
may not be amended to increase materially the payments described herein without
approval of the shareholders of the Fund, and all material amendments of the
Plan must also be approved by the Trustees of the Fund in the manner described
above. The Plan may be terminated any time by vote of the Rule 12b-1 Trustees or
by a vote of a majority of the outstanding voting securities of the Fund. Under
the Plan, the President or a Vice President of the Fund shall provide to the
Trustees for their review, and the Trustees shall review at least quarterly, a
written report of the amount expended under the Plan and the purposes for which
such expenditures were made.
So long as the Plan is in effect, the selection and nomination of Trustees
who are not interested persons of the Fund shall be committed to the discretion
of the Trustees who are not such interested persons. The Trustees have
determined that in their judgment there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders.
During the fiscal year ended September 30, 1994, the Fund made payments
under the Plan aggregating $88,402 to the Principal Underwriter, of which
$42,601 was paid to Authorized Firms for distribution and shareholder services
and the balance was retained by the Principal Underwriter for such services.
OTHER INFORMATION
Eaton Vance, pursuant to the Investment Advisory Agreement, controls the use
of the Fund's name and may use the words "Eaton Vance" in other connections and
for other purposes. EVC may require the Fund to cease using such words in its
name if EVC or Eaton Vance or any other subsidiary or affiliate of EVC ceases to
act as investment manager of the Fund.
The Fund's Declaration of Trust may not be amended without the affirmative
vote of a majority of the outstanding shares of the Fund, except that the
Declaration of Trust may be amended by the Trustees to change the name of the
Trust, to make such other changes as do not have a materially adverse effect on
the rights or interests of shareholders and to conform it to applicable Federal
laws or regulations. The Declaration under which the Fund is established may be
terminated (i) upon the sale of the Fund's assets to another diversified
open-end management investment company, if approved by the holders of two-thirds
of the outstanding shares of the Fund, except that if the Trustees recommend
such sale of assets, the approval by vote of the holders of a majority of the
outstanding shares will be sufficient, or (ii) upon liquidation and distribution
of the assets of the Fund, if approved by a majority of the Trustees or by vote
of the holders of a majority of the Fund's outstanding shares. If not so
terminated, the Fund may continue indefinitely.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Fund provide that no natural person
shall serve as a Trustee of the Fund after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
that office either by declaration in writing filed with the Fund's Custodian or
by votes cast in person or by proxy at a meeting called for the purpose. The
By-Laws also provide that the Trustees shall promptly call a meeting of
shareholders for the purpose of voting upon a question of removal of a Trustee
when requested so to do by the record holders of not less than 10 per centum of
the outstanding shares.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees holding office have been elected by
shareholders. In such an event the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Fund's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The right to redeem can be suspended and the payment of the redemption price
deferred when the New York Stock Exchange is closed (other than for customary
weekend and holiday closings), during periods when trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange Commission,
or during any emergency as determined by the Securities and Exchange Commission
which makes it impracticable for the Fund to dispose of its securities or value
its assets, or during any other period permitted by order of the Securities and
Exchange Commission for the protection of investors.
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1994
- -----------------------------------------------------------------------------
CORPORATE BONDS & NOTES - 95.5%
- -----------------------------------------------------------------------------
FACE AMOUNT VALUE
- -----------------------------------------------------------------------------
AUTOMOTIVE/TRUCK - 3.4%
JPS Automotive Products, Sr. Notes,
11.125%, 6/15/2001 $ 950,000 $ 957,125
Motor Wheel Corp., Sr. Sub. Notes,
11.50%, 3/1/2000 1,125,000 1,113,750
Truck Components Inc., Sr. Notes,
12.75%, 6/30/2001 1,400,000 1,484,000
------------
$ 3,554,875
------------
CHEMICALS - 3.1%
Huntsman Corp., 1st Mtg. Notes,
11%, 4/15/2004 $l,500,000 $ 1,560,000
UCC Investors Sr. Sub. Notes,
11%, 5/1/2003 800,000 824,000
UCC Investors Holding Inc. Sub. Disc.
Debs., 12% (0% until 1998), 5/1/2005 500,000 335,000
10.5%, 5/1/2002
UCC Investors, Sr. Notes,
10.5%, 5/1/2002 500,000 505,000
------------
$ 3,224,000
------------
CONSUMER GOODS - 3.3%
FM Holdings, Inc., Accr. Debs.,
13.125%, 9/15/2005 $ 600,000 $ 600,000
Formica Corp., Sub. Disc. Debs.,
15.75%, 10/1/2001 1,000,000 1,030,000
Formica Corp., Sr. Sub. Notes,
14%, 10/1/1999 300,000 313,500
K-III Communications, Sr. Notes,
10.25%, 6/1/2004 400,000 392,000
Newflo Corp., Sub. Notes,
13.25%, 11/15/2002 1,000,000 1,050,000
------------
$ 3,385,500
------------
CONTAINERS - 6.8%
Anchor Glass, Sr. Sub. Debs.
9.875%, 12/15/2008 $l,000,000 $ 910,000
Container Corp. of America, Sr. Notes,
9.75%, 4/1/2003 1,000,000 965,000
Container Corp., Sr. Notes,
10.75%, 5/1/2002 600,000 618,000
Gaylord Container Corp., Sr. Sub.
Disc. Debs., 12.75% (0% until 1996),
5/15/2005 1,500,000 1,269,375
Silgan Holdings, Sr. Sub. Notes,
11.75%, 6/15/2002 500,000 515,000
Silgan Holdings, Sr. Sub. Notes,
13.25% (0% until 1996), 12/15/2002 1,000,000 815,000
Stone Container Corp., Sr. Notes,
9.875%, 2/1/2001 600,000 564,000
Stone Container Corp., Sr. Sub. Debs.,
12.625%, 7/15/1998 800,000 838,000
Stone Container Corp., Sr. Sub. Debs.,
10.75%, 4/1/2002 500,000 496,765
------------
$ 6,991,140
------------
ENERGY - 1.7%
Mesa Capital Corp., Sec. Disc. Notes,
12.75% (0% until 1995), 6/30/1998 $1,200,000 $ 1,060,500
Synergy Group, Sr. Notes,
9.5%, 9/15/2000 893,000 732,260
------------
$ 1,792,760
------------
FOOD - 5.5%
Americold Corp., First Mtg. Notes,
11.5%., 3/1/2005 $ 720,000 $ 644,400
Flagstar Corp., Sub. Debs.,
11.25%, 11/1/2004 1,243,000 1,065,873
Food 4 Less Supermarket Inc., Sr. Sub.
Debs., 13.75%, 6/15/2001 1,500,000 1,612,500
Purina Mills, Sr. Sub. Notes,
10.25%, 9/1/2003 1,050,000 1,042,125
Specialty Foods Corp., Sr. Disc. Debs.,
13% (0% until 1999), 8/15/2005 800,000 296,000
Specialty Foods Corp., Sr. Notes,
10.25%, 8/15/2001 500,000 460,000
Specialty Foods Corp., Sr. Sub. Notes,
11.25%, 8/15/2003 650,000 549,250
------------
$ 5,670,148
------------
HEALTH - 3.2%
American Medical Intl. Inc. Sr. Sub.
Notes, 13.5%, 8/15/200i $ 750,000 $ 836,250
Hallmark Healthcare, Sr. Sub. Notes,
10.625%, 11/15/2003 1,000,000 1,010,000
Healthtrust Inc., Sub. Notes,
10.25%, 4/15/2004 800,000 824,000
Ornda Corp., Sr. Sub. Notes, 11.375%, 8/15/2004 675,000 681,750
------------
$ 3,352,000
------------
HOME BUILDING - 4.3%
American Standard, Sr. Notes,
14.25%, 6/30/2003 $ 333,000 342,491
American Standard, Sr. Notes,
11.375%, 5/15/2004 750,000 798,750
Building Materials, Sr. Disc. Notes,
0%, 7/1/2004 1,450,000 775,750
Overhead Door Corp., Sr. Notes,
12.25%, 2/1/2000 750,000 772,500
Tarkett International, Sr. Sub. Notes,
9%, 3/1/2002 900,000 841,500
USG Corp., Sr. Notes, 8.75%, 3/1/2017 650,000 559,000
USG Corp., Sr. Notes, 10.25%, 12/15/2002 400,000 407,000
------------
$ 4,496,991
------------
HOTEL & RESTAURANT - 1.7%
American Restaurant Group, Sr. Sec.
Notes, 12%, 9/15/1998 $l,200,000 $ 1,140,000
Host Marriot, Sr. Notes, 11.25%, 7/18/2005 565,500 576,810
------------
$ 1,716,810
------------
INDUSTRIAL - 8.2%
Clevite Industries Inc., Sub. Debs.,
12.375%, 6/30/2001** $1,000,000 $ 456,000
Dial Call Communications, Sr. Disc.
Notes, 12.25% (0% until 1999), 4/15/2004 1,800,000 954,000
Foamex L.P. Sr. Notes, 11.25%, 10/1/2002 1,300,000 1,313,000
GI Holdings., Sr. Disc. Notes, 0%, 10/1/1998 1,200,000 744,000
NL Industries Inc., Sr. Sec. Notes,
11.75%, 10/15/2003 1,100,000 1,127,500
NL Industries Inc., Sr. Sec. Disc. Notes,
0%, 10/15/2005 1,250,000 787,500
Nortek Inc., Sr. Sub. Notes, 9.875%, 3/1/2004 1,200,000 1,116,000
Plastic Specialties, Sr. Sec. Notes,
11.25%, 12/1/2003 1,200,000 1,104,000
Southdown Inc., Sr. Sub. Notes,
14%, 10/15/2001 750,000 832,500
------------
$ 8,434,500
------------
LEISURE - 5.2%
Bally's Park Place Funding, 1st Mtg.
Bds., 9.25%, 3/15/2004 $ 600,000 $ 501,000
Cablevision Industries Inc., Sr. Notes,
10.75%, 1/30/2002 1,000,000 995,000
GNF Corp., First Mtg. Notes,
10.625%, 4/1/2003 1,050,000 567,000
Imax Corporation 144A, Sr. Notes,
10% (7% until 1997), 3/1/2001+ 600,000 528,000
Roadmaster Industries Inc., Sr. Sub.
Notes, 11.75%, 7/15/2002 1,600,000 1,584,000
Trump Plaza Funding, 1st Mtg. Bonds,
10.875%, 6/15/2001 800,000 572,000
Trump Taj Maha], First Mtg. Bonds,
11.35%, 11/15/1999 906,315 598,168
------------
$ 5,345,168
------------
MANUFACTURING - 15.0%
Applied Extrusion Inc., Sr. Notes,
11.5%, 4/1/2002 $ 800,000 $ 812,000
Blue Bell Funding, Sec. Ext. Notes,
11.85%, 5/1/1999 750,000 795,000
Bucyrus Erie Co., Sr. Notes,
16%, 1/1/1996* 1,300,000 676,000
Eagle Industries, Inc., Sr. Disc. Notes,
10.5% (0% until 1998), 7/15/2003 1,200,000 762,000
Essex Group, Inc., Sr. Notes,
10%, 5/1/2003 1,525,000 1,483,063
Exide Corp., Sr. Notes,
10.75%, 12/15/2002 500,000 515,000
Federal Industries Ltd., Sr. Notes,
10.25%, 6/15/2000 1,000,000 972,500
Interlake Corp., Sr. Sub. Debs.,
12.125%, 3/1/2002 850,000 769,250
Jorgenen Earle, Sr. Notes,
10.75%, 3/1/2000 1,750,000 1,741,250
Key Plastics Inc., Sr. Notes,
14%, 11/15/1999 1,000,000 1,133,750
Owens Illinois Inc., Sr. Notes,
11%, 12/1/2003 1,000,000 1,060,000
Pace Industries, Sr. Notes,
10.625%, 12/1/2002 1,100,000 1,012,000
SPX Corp., Sr. Sub. Notes,
11.75%, 6/1/2002 400,000 414,000
Terex Corporation, Sr. Sec Notes,
13%, 8/1/1996 293,000 271,025
Terex Corp., Sr. Sub. Notes,
13.5%, 7/1/1997 200,000 176,000
Tuboscope Vetco, Sr. Sub. Debs.,
10.75%, 4/15/2003 500,000 500,000
Unisys Corp., Sr. Notes,
13.5%, 7/1/1997 900,000 974,250
Waters Corp., Sr. Sub. Notes,
12.75%, 9/30/2004+ 1,400,000 1,421,000
------------
$ 15,488,088
------------
METALS - 11.3%
Acme Metals Inc., Sr. Notes,
12.5%, 8/1/2002 $l,000,000 $ 1,007,500
Acme Metals Inc., Sr. Disc. Notes,
13.5% (0% until 1997), 8/1/2004 800,000 544,000
Agricultural Mining & Chemical, Sr.
Notes, 10.75%, 9/30/2003 1,000,000 1,020,000
AK Steel Holding Corp., Sr. Notes,
10.75%, 4/1/2004 1,200,000 1,209,000
Armco Inc. Sr. Notes, 11.375%, 10/15/1999 1,400,000 1,414,000
Inland Steel Corp., First Mtg. Bonds,
12%, 12/1/1998 750,000 828,750
Maxxam Group, Inc., Sr. Sec. Notes,
11.25%, 8/1/2003 500,000 475,000
Maxxam Group, Inc., Sr. Sec. Disc.
Notes, 12.25% (0% until 1998), 8/1/2003 900,000 531,000
Republic Engineered Steel, First Mtg.,
9.875%, 12/15/2001 1,200,000 1,110,000
Stelco Inc., Debs., 13.5%, 10/1/2000 CAD 487,000 366,687
U.S. Can Co., Sr. Sub. Notes,
13.5%, 1/15/2002 750,000 847,500
Weirton Steel Corp., Sr. Notes,
11.50%, 3/1/1998 500,000 517,500
Weirton Steel Corp., Sr. Notes,
10.875%, 10/15/1999 1,089,000 1,103,973
Wheeling-Pittsburgh Corp., Sr. Notes,
9.375%, 11/15/2003 800,000 724,000
------------
$ 11,698,910
------------
MISCELLANEOUS - 1.7%
Corporate Express 144A, Sr. Sub.
Notes, 9.125%, 3/15/2004+ $l,700,000 $ 1,564,000
YPF Sociedad Anonima, Neg. Oblig.
Notes, 8%, 2/15/2004 200,000 171,500
------------
$ 1,735,500
------------
OIL/OIL SERVICES - 3.5%
Empire Gas Corp., Sr. Sec. Notes,
7%, 7/15/2004 $l,000,000 $ 768,750
Gulf Canada Resources LTD, Sr. Sub.
Notes, 9.25%, 1/15/2004 800,000 742,000
Petroleum Heat & Power, Sub. Notes,
10.125%, 4/1/2003 600,000 573,000
Petroleum Heat & Power, Sub. Debs.,
9.375%, 2/1/2006 200,000 180,000
Trans Texas Gas Corp., Sr. Sec. Notes,
10.5%, 9/1/2000 1,400,000 1,372,000
------------
$ 3,635,750
------------
PAPER/PACKAGING - 3.2%
Fort Howard Corp., Sub. Debs., 9%, 2/1/2006 $ 900,000 $ 769,500
Fort Howard Corp., CMO, 11%, 1/2/2002 664,279 690,850
Riverwood International, Sr. Sub.
Notes, 10.375%, 6/30/2004 1,100,000 1,122,000
Williamhouse Regency, Sr. Sub. Debs.,
11.5%, 6/15/2005 800,000 776 000
------------
$ 3,358,350
------------
RETAILING - 7.9%
Apparel Retailers, Sr. Disc. Debs.,
12.75% (0% until 1998), 8/15/2005 $1,000,000 $ 590,000
Big 5 Holdings Inc., Sr. Sub. Notes,
13.625%, 9/15/2002 1,300,000 1,358,500
Duane Reade G.P., Sr. Notes,
12%, 9/15/2002 1,000,000 980,000
Grand Union Capital Corp., Sr. Notes,
11.375%, 2/15/1999 500,000 460,000
Levitz Furniture Corp., Sr. Sub. Notes,
9.625%, 7/15/2003 1,875,000 1,650,000
Pathmark Stores, Sr. Sub. Notes,
10.75%, 11/1/2003 2,100,000 1,039,500
Purity Supreme, Sr. Sec. Notes,
11.75%, 8/1/1999 1,400,000 1,232,000
Specialty Retailers, Inc., Sr. Sub. Notes,
11%, 8/15/2003 900,000 859,500
------------
$ 8,169,500
------------
TEXTILES - 3.8%
CMI Industries, Sr. Sub. Notes,
9.5%, 10/1/2003 $ 600,000 $ 504,000
Dan River Inc., Sub. Notes,
10.125%, 12/15/2003 1,050,000 950,250
JPS Textile Group, Sr. Sub. Notes,
10.25%, 6/1/1999 754,000 565,500
JPS Textile Group, Discount Notes,
10.85%, 6/1/1999 629,000 471,750
Westpoint Stevens, Sr. Sub. Debs.,
9.375%, 12/15/2005 1,600,000 1,444,000
------------
$ 3,935,500
------------
TRANSPORTATION - 1.2%
Delta Air Lines, Inc., Trust Certs.,
10.5%, 4/30/2016 $ 500,000 S 486,585
Moran Transportation, 1st Mtg. Notes,
11.75%, 7/15/2004 700 000 707,000
------------
$ 1,193,585
------------
UTILITIES - 1.5%
Midland Cogeneration Venture, Sr. Sec.
Lease Obligations, 10.33%, 7/23/2002 $ 879,173 $ 846,205
Midland Funding II, Sec. Lease Obligations,
11.75%, 7/23/2005 800,000 753,662
------------
$ 1,599,867
------------
TOTAL CORPORATE BONDS AND NOTES
(IDENTIFIED COST, $103,642,139) $ 98,778,942
------------
- -----------------------------------------------------------------------------
PREFERRED STOCKS - 0.3%
- -----------------------------------------------------------------------------
SHARES VALUE
- -----------------------------------------------------------------------------
Grand Union HLDG Series C, 12% PFD Stock - PIK 1,800 $ 106,200
Terex CV PFD 8,000 228,000
------------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST, $413,500) $ 334,200
------------
- -----------------------------------------------------------------------------
COMMON STOCKS, WARRANTS AND RIGHTS - 0.6%
- -----------------------------------------------------------------------------
SHARES/WARRANTS VALUE
- -----------------------------------------------------------------------------
AUTO/TRUCK - 0.2%
APS Holding Corp., Cl A Common Stock 2,124 $ 59,875
Terex Corp., Rights, Exp. 7/1/1997+* 2,166 15,159
Terex Corp., Rights, Exp. 8/1/1996+* 1,500 7,500
Terex Corp., Warrants* 8,000 100,000
------------
$ 182,534
------------
CHEMICALS - 0.1%
UCC Invt. Hldgs, Cl A Common Stock+ 7,431 $ 92,886
------------
FOOD - 0.0%
Servam Corp., Common Stock* 884 $ 0
Servam Corp., $2.00 Wts. Exp. 4/1/2001+* 7,864 0
Servam Corp., $4.50 Wts. Exp. 4/1/2001+* 1,768 0
Specialty Foods Acq., Common Stock+* 12,000 9,000
------------
$ 9,000
------------
INDUSTRIAL - 0.0%
Thermadyne Holdings Corporation, Common Stock* 777 $ 8,936
------------
MANUFACTURING - 0.4%
Southdown Inc, Wts.+* 7,500 $ 155,625
Triangle Wire and Cable. Wts.+* 7,500 0
Triangle Wire and Cable, Common Stock 31,667 221,669
Waxman Industries, Inc, Wts.+* 14,000 700
------------
$ 377,994
------------
RETAILING - 0.0%
Purity Supreme, Wts., Exp. 8/1/1999+* 1,733 $ 35
------------
TOTAL COMMON STOCKS, WARRANTS AND RIGHTS
(IDENTIFIED COST, $838,288) $ 671,385
------------
- -----------------------------------------------------------------------------
SHORT-TERM OBLIGATION - 2.2%
----------------------------------------------------------------------------
FACE AMOUNT VALUE
- -----------------------------------------------------------------------------
CXC, Inc., 5.05%, 10/3/1994, at amortized cost $2,258,000 $ 2,257,050
------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $107,150,977) $102,041,577
OTHER ASSETS, LESS LIABILITIES - 1.4% 1,440,696
------------
NET ASSETS - 100% $103,482,273
============
* Non-income producing security.
** On December 19, 1994, the United States Bankruptcy Court for the District
of Delaware confirmed the pre-packaged Plan of Reorganization of The
Pullman Company, the parent company of Clevite Industries. Under the terms
of the Plan of Reorganization, all Clevite Industries debentures are to be
exchanged for common stock in The Pullman Company. (Unaudited)
+ Restricted security (Note 8).
CAD - The principal amount of these securities is stated in Canadian Dollars,
the currency in which the security is denominated.
The accompanying notes are an integral part of
the financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
September 30, 1994
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note IA) (identified cost,
$107,150,977) $102,041,577
Cash 302
Receivable for investments sold 457,958
Receivable for Trust shares sold 244,729
Interest and dividends receivable 2,807,329
------------
Total assets $105,551,894
LIABILITIES:
Demand note payable $ 341,000
Dividends payable 370,299
Payable for investments purchased 1,117,893
Payable for Trust shares redeemed 209,913
Trustees' fees payable 1,188
Custodian fee payable 2,411
Accrued expenses 33,917
----------
Total liabilities 2,069,621
NET ASSETS for 13,093,639 shares of beneficial
interest outstanding $103,482,273
============
SOURCES OF NET ASSETS:
Paid-in capital $121,935,263
Accumulated net realized loss on investment
transactions (computed on the basis of identified cost) (12,568,308)
Unrealized depreciation of investments
(computed on the basis of identified cost) (5,109,342)
Accumulated distributions in excess of net
investment income (775,340)
------------
Total $103,482,273
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($103,482,273 / 13,093,639 shares of beneficial interest) $7.90
=====
COMPUTATION OF OFFERING PRICE:
Offering price per share (100/95.25 of $7.90) $8.29
=====
On sales of $100,000 or more, the offering price is reduced.
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended September 30, 1994
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Income -
Interest (net of foreign withholding tax of $4,886) $11,106,849
Dividends 30,679
-----------
Total income $11,137,528
===========
Expenses -
Investment adviser fee (Note 4) $ 645,516
Compensation of Trustees not members of the
Investment Adviser's organization 40,014
Service fees (Note 5) 103,543
Custodian fees (Note 4) 79,935
Transfer and dividend disbursing agent fees 71,782
Printing and postage 55,531
Legal and accounting services 33,893
Registration costs 25,448
Miscellaneous 15,220
-----------
Total expenses 1,070,882
-----------
Net investment income $10,066,646
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions
(identified cost basis) ($169,995 net gain for
federal income tax purposes) $ 147,154
Change in unrealized appreciation (depreciation)
of investments (6,048,456)
-----------
Net realized and unrealized loss on investments (5,901,302)
-----------
Net increase in net assets from operations $ 4,165,344
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------
1994 1993
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
From operations -
Net investment income $ 10,066,646 $ 9,773,703
Net realized gain on investment transactions 147,154 2,071,233
Increase (decrease) in unrealized appreciation of
investments (6,048,456) (1,335,740)
------------ -----------
Net increase in net assets from operations $ 4,165,344 $10,509,196
------------ -----------
Distributions to shareholders -
From net investment income $(10,066,646) $(9,773,703)
In excess of net investment income (563,437) (39,031)
------------ -----------
Total distributions to shareholders $(10,630,083) $(9,812,734)
------------ -----------
Net increase from Trust share transactions (Note 2) $ 14,824,209 $ 8,647,843
------------ -----------
Net increase in net assets $ 8,359,470 $ 9,344,305
NET ASSETS:
At beginning of period 95,122,803 85,778,498
------------ -----------
At end of period (including distributions in excess
of net investment income of $775,340 and $257,221,
respectively). $103,482,273 $95,122,803
============ ===========
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 8.40 $ 8.33 $ 7.56 $ 6.89 $ 9.16
------- ------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment income $ 0.83 $ 0.92 $ 0.97 $ 1.04 $ 1.15
Net realized and unrealized gain (loss) on investments (0.47) 0.07 0.77 0.71 (2.26)
------- ------- ------- ------- -------
Total income from operations $ 0.36 $ 0.99 $ 1.74 $ 1.75 $ (1.11)
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From netinvestment income $ (0.81) $ (0.92) $ (0.97) $ (1.04) $ (1.15)
From paid-in capital -- -- -- (0.04) (0.01)
In excess of net investment income (0.05) -- -- -- --
------- ------- ------- ------- -------
Total distributions $ (0.86) $ (0.92) $ (0.97) $ (1.08) $ (1.16)
------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 7.90 $ 8.40 $ 8.33 $ 7.56 $ 6.89
======= ======= ======= ======= =======
TOTAL RETURN(1) 4.25% 12.59% 24.25% 28.53% (13.06)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000 omitted) $103,482 $95,123 $85,778 $70,773 $65,588
Ratio of net expenses to average daily net assets 1.04% 1.03% 1.08% 1.15% 1.05%
Ratio of net investment income to average daily net assets 9.75% 11.01% 12.02% 15.36% 14.26%
PORTFOLIO TURNOVER 70% 102% 90% 80% 67%
(1) Total investment return is calculated assuming a purchase at the net asset value on the first day and a sale
at the net asset value on the last day of each period reported. Dividends and distributions, if any, are
assumed to be reinvested at the net asset value on the payable date.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Trust, a Massachusetts business trust, is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end, management
investment company. The following is a summary of significant accounting
policies consistently followed by the Trust in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. INVESTMENT VALUATIONS - Investments listed on securities exchanges or in the
NASDAQ National Market are valued at closing sale prices. Listed or unlisted
investments for which closing sale prices are not available are valued at the
mean between the latest bid and asked prices. Fixed income investments (other
than short-term obligations), including listed investments and investments for
which price quotations are available, will normally be valued on the basis of
market valuations furnished by a pricing service. Short-term obligations,
maturing in sixty days or less, are valued at amortized cost, which approximates
value. Investments for which there is no quotation or valuation are valued at
fair value using methods determined in good faith by or at the direction of the
Trustees.
B. INCOME - Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes. Dividend income is recorded on the ex-dividend date.
C. FEDERAL TAXES - The Trust's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investments. Accordingly, no provision for federal income or excise tax
is necessary. At September 30, 1994, the Trust, for federal income tax purposes,
had a capital loss carryover of $12,556,308 which will reduce the Trust's
taxable income arising from future net realized gains on investments, if any, to
the extent permitted by the Internal Revenue Code, and thus will reduce the
amount of the distributions to shareholders which would otherwise be necessary
to relieve the Trust of any liability for federal income or excise tax. Such
capital loss carryovers will expire on September 30, 1999 ($7,407,810) and 2000
($5,148,498).
D. DISTRIBUTIONS TO SHAREHOLDERS - The net investment income of the Trust is
determined daily, and substantially all of the net investment income so
determined is declared daily as a dividend to shareholders of record at the time
of declaration. Distributions are paid monthly. Distributions of realized
capital gains, if any, are made at least annually. Shareholders may reinvest
capital gain distributions in additional shares of the Trust at the net asset
value as of the ex-dividend date. Distributions are paid in the form of
additional shares of the Trust or, at the election of the shareholder, in cash.
The Trust distinguishes between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in temporary overdistributions for financial statement
purposes are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital. The
federal income tax treatment of distributions for the calendar year will be
reported to shareholders prior to February 1, 1995.
E. OTHER - Investment transactions are accounted for on the date the investments
are purchased or sold.
<PAGE>
- --------------------------------------------------------------------------------
(2) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Trust shares were as follows:
--------------------------------------------------
1994 1993
--------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
Sales 3,376,464 $28,296,646 1,930,697 $16,129,233
Issued to shareholders
electing to receive
payment of distributions
in Trust shares 743,312 6,186,563 684,249 5,705,563
Repurchases (2,351,168) (19,659,000) (1,582,976) (13,186,953)
--------- ----------- --------- -----------
Net increase 1,768,608 $14,824,209 1,031,970 $ 8,647,843
========= =========== ========= ===========
- --------------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS
The Trust invests primarily in debt securities. The ability of the issuers of
the debt securities held by the Trust to meet their obligations may be affected
by economic developments in a specific industry. Purchases and sales of
investments, other than U.S. Government securities and short-term obligations,
aggregated $83,535,234 and $68,598,565, respectively.
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee, computed at the monthly rate of 5/96 of 1% (5/8 of
1% annually) of the Trust's average monthly net assets, was earned by Eaton
Vance Management (EVM) as compensation for management and investment advisory
services rendered to the Trust. Except as to Trustees of the Trust who are not
members of EVM's organization, officers and Trustees receive remuneration for
their services to the Trust out of such investment adviser fee. Eaton Vance
Distributors, Inc., a subsidiary of EVM and the Trust's principal underwriter,
received approximately $71,474 as its portion of the sales charge on sales of
Trust shares during the year ended September 30, 1994. Investors Bank & Trust
Company (IBT), an affiliate of EVM, serves as custodian of the Trust. Pursuant
to the custodian agreement, IBT receives a fee reduced by credits which are
determined based on the average daily cash balances the Trust maintains with
IBT. Certain of the officers and Trustees of the Trust are officers and
directors/trustees of the above organizations.
- --------------------------------------------------------------------------------
(5) SERVICE PLAN
The Trustees of the Trust on behalf of the Fund have adopted a Service Plan
designed to meet the requirements of Rule 12b-1 under the Investment Company Act
of 1940 and the service fee requirements of the revised sales charge rule of The
National Association of Securities Dealers Inc. The Service Plan provides that
the Trust may make service fee payments to the Principal Underwriter, Eaton
Vance Distributors, Inc., a subsidiary of Eaton Vance Management, Authorized
Firms or other persons in amounts not exceeding 0.25% of the Trust's average
daily net assets for any fiscal year. The Trustees have implemented the Service
plan by authorizing the Fund to make quarterly service fee payments to the
Principal Underwriter and Authorized Firms in amounts not expected to exceed
0.25% of that portion of the Trust's average daily net assets for any fiscal
year which is attributable to shares of the Trust sold on or after May 22, 1989
by such persons and remaining outstanding for at least twelve months. Such
payments are made for personal services and/or the maintenance of shareholder
accounts. Pursuant to the Plan, the Trust made provisions of $103,543 under the
Plan to the Principal Underwriter and Authorized Firms during the fiscal year
ended September 30, 1994.
- --------------------------------------------------------------------------------
(6) LINE OF CREDIT
The Trust participates with other funds managed by EVM in a $120 million
unsecured line of credit agreement with a bank. The line of credit consists of a
$20 million committed facility and a $100 million discretionary facility.
Borrowings will be made by the Trust solely to facilitate the handling of
unusual and/or unanticipated short term cash requirements. Interest is charged
to each fund based on its borrowings at an amount above either the bank's
adjusted certificate of deposit rate, a variable adjusted certificate of deposit
rate, or a federal funds effective rate. In addition, a fee computed at an
annual rate of 1/4 of 1% on the $20 million committed facility and on the daily
unused portion of the $100 million discretionary facility is allocated among the
participating funds at the end of each quarter. The Trust did not have any
significant borrowings or allocated fees during the period and at September 30,
1994 had a balance of $341,000 outstanding pursuant to this line of credit.
- --------------------------------------------------------------------------------
(7) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized depreciation/appreciation in value of the investments
owned at September 30, 1994, as computed on a federal income tax basis, are as
follows:
Aggregate cost $107,162,977
============
Gross unrealized depreciation $ 6,862,396
Gross unrealized appreciation 1,681,054
------------
Net unrealized depreciation $ 5,181,342
============
<PAGE>
- --------------------------------------------------------------------------------
(8) NOT READILY MARKETABLE SECURITIES
At September 30, 1994, the Trust owned the following securities (constituting
3.7% of net assets) which were not readily marketable at such date. The Trust
has various registration rights (exercisable under a variety of circumstances)
with respect to these securities. The fair value of these securities is
determined based on valuations provided by brokers when available, or if not
available, they are valued at fair value using methods determined in good faith
by or at the direction of the Trustees.
<TABLE>
<CAPTION>
DESCRIPTION DATES OF ACQUISITION SHARES/FACE COST FAIR VALUE
- ----------- -------------------- ----------- ---- ----------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES
- -------------------------
Corporate Express, 144A, Sr. Sub. Notes,
9.125%, 3/15/2004 2/22/94-9/16/94 1,700,000 $l,574,000 $l,564,000
Imax Corporation, 144A, Sr. Notes, 10%
(7% until 1997), 3/1/2001 2/22/94-3/03/94 600,000 554,316 528,000
Waters Corporation, Sr. Sub. Notes,
12.75%, 9/30/2004 8/11/94 1,400,000 1.400,000 1.421.000
COMMON STOCKS, WARRANTS AND RIGHTS
- ----------------------------------
Purity Supreme, Wts., Exp. 8/1/1999 7/29/92 1,773 0 35
Servam Corp., $2.00 Warrants, Exp. 4/1/2001 8/28/91 7,864 0 0
Servam Corp., $4.50 Warrants, Exp. 4/1/2001 8/28/91 1,768 0 0
Specialty Foods, Acq. Common Stock 8/10/93 12,000 8,722 9,000
Southdown Inc. Warrants 10/28/91 7,500 22,500 155,625
Terex Corp., Rights, Exp. 8/1/1996 7/24/92 1,500 0 7,500
Terex Corp., Rights, Exp. 7/1/1997 8/20/92-8/02/94 2,165 0 15,159
Triangle Wire & Cable Inc., Warrants 10/28/91 7,500 0 0
UCC Invt. Hldgs. Class A Common 12/05/89 7,431 7,431 92,888
Waxman Industries, Inc. Warrants 10/01/91 14,000 14,000 700
---------- ----------
$3,580,969 $3,793,907
========== ==========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
Eaton Vance Income Fund of Boston:
We have audited the accompanying statement of assets and liabilities of Eaton
Vance Income Fund of Boston, including the investment portfolio, as of September
30, 1994, the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Eaton
Vance Income Fund of Boston as of September 30, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 4, 1994
<PAGE>
[logo]
INVESTMENT ADVISER
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
800 225-6265
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
800-262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
EATON VANCE
INCOME FUND OF BOSTON
24 Federal Street
Boston, Massachusetts 02110 IBSAI
EATON VANCE
Income
Fund of
Boston
Seeking to provide as much current income as possible by investing primarily in
high-yielding, high risk, fixed-income securities
STATEMENT OF
ADDITIONAL INFORMATION
February 1, 1995
